Propane Price Insider
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Dear Propane Price Insider readers:
On Oct. 6, your PPI newsletter is getting a makeover. In addition to a fresh redesign, the newsletter is undergoing a name change. It will be called Trader's Corner. The new name will reflect the strategic role that propane marketers play – deciding when to buy and sell their supply in order to protect customers in a volatile energy market and maximize business profits. Please be on the lookout for this name change in your inbox so you won't miss this valuable weekly propane market report.

Trader's Corner

This week’s Trader’s Corner looks at total North American propane inventory.

By just about any measure, it has been a good propane inventory build period in North America this summer. Coming out of last winter, inventory in the United States and Canada was very low. Despite high exports, propane production has been robust enough to put propane inventory in seemingly good shape to start this winter.

Dollar Index vs. Crude

The August report from the National Energy Board in Canada (showing inventory levels at the end of July) had Canadian propane inventory at a new five-year high for July. Inventory is well above where it was this time last year: 9.2 million barrels compared with 6.6 million barrels in July of 2013.

In fact, inventory at its current level is not far off of the 9.5 million barrels of inventory present at the beginning of last winter. We recently reported on U.S. propane imports, which primarily come from Canada. Those imports have run about 174,000 barrels per week less than they did in 2013 during the summer build period, a likely contributor to the improved inventory position in Canada.

In the United States, the story is the same.

Dollar Index vs. Crude

During the past two weeks, the Energy Information Administration (EIA) has reported U.S. propane inventories at five-year highs for those respective weeks. As of the last report for week 34 of the year, U.S. propane inventory stood at 74.7 million barrels.

Throughout the summer, we provided our daily readers a weekly report on the status of inventories. We set as the goal a target of 67.5 million barrels by the first week of October, an inventory level that has been the inventory average the first week of October the past five years. Inventories surpassed that level four weeks ago.

The highest first-week-of-October inventory level over the past five years happened in 2012 at 75.9 million barrels. Current inventory is just 1.2 million barrels from that mark. Inventory changes can be unpredictable, but it would not be much of a reach to project that a new five-year-high mark will be set by the first week of October this year. Perhaps there will be a significantly higher inventory level to begin this winter.

Inventory would only need to build 237,000 barrels per week over the next five weeks to equal that mark. Last week, inventory improved by 1.9 million barrels. Inventory builds should start going down as fall demand picks up, but it would have to go down dramatically not to set a new five-year-high inventory position to start this winter.

Driving this incredible build in inventory is the sharp rise in propane production. As we pointed out earlier, propane imports are down this year. The build also occurred despite increased exports. Exports during this inventory build period (April until now) have run about 4.5 million barrels higher per month than they did in 2013.

There is still one area of concern with inventory. It is questionable if Midwest propane inventory will reach the first-week-of-October five-year average inventory level. But even that inventory level is certain to start winter above where it was last year.

For now, it would appear the winter of 2014-15 will begin with ample supply. The infrastructure issues that made it difficult to get supply where it needs to be are still present, however.

The keys to having a different outcome than last year’s will be based on the decisions and preparation that each propane retailer has made since last year. We hope more alternative supply options are in place. Most importantly, we hope more barrels are pushed into customer tanks. If not, the great inventory position we currently enjoy could become less comfortable in short order.

Call Cost Management Solutions today at 888-441-3338 for more information about how Client Services can enhance your business, or drop us an email at
Prices posted gains as compared with one week ago, but this may have been covering for the three-day weekend. We are going to start the week neutral to make sure the strength wasn't from a long, three-day weekend covering. The bull is at the gate in propane and crude and it won’t take much to let him out, as prices may have found their floor in this current trend.

Monday: West Texas Intermediate (WTI) crude moved lower on Monday, keeping the ongoing downtrend intact. WTI was limited by disappointing U.S. economic news. Conway was slightly down to start the week, while Belvieu was unchanged.

Tuesday: Propane prices at both hubs posted small gains on the day in line with the gain in WTI crude. WTI crude managed a good gain on the day, buoyed by good U.S. economic news.

Wednesday: U.S. crude inventory fell just over 2 million barrels, but it wasn’t enough to sponsor a break higher by the U.S. benchmark crude. The EIA reported an above-average 1.9-million-barrel build in U.S. propane inventory, putting bearishness into the session. Propane and WTI stayed relatively steady on the day.

Thursday: WTI crude kept its new rally attempt going and closed up 0.71 percent. Propane was starting to develop a little uptrend, with rising crude in support. Trading activity was rather light at both major hubs.

Friday: Propane prices posted a gain following crude to end the week. Crude had its biggest gain of the week at 1.49 percent.

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Cost Management Solutions LLC (CMS) is a firm dedicated to the analysis of the energy markets for the propane marketplace. Since we are not a supplier of propane, you can be assured our focus is to provide an unbiased analysis.

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Dale G. Delay 888-441-3338,
Mark Rachal 888-441-3338,

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