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 U.S. and regional inventory positions.

Last week, we looked at North American propane supply. The data shows both U.S. and Canadian propane inventory already in good shape for this winter. This week, we are going to take a different look at U.S. inventory as we drill down a little further into inventory conditions regionally on the Gulf Coast and in the Midwest.

Each Thursday throughout this summer’s inventory build period, we provided our daily readers updates on the status of inventory positions in the form of simple bar charts that showed an inventory goal, where current inventory stands and how far to reach the goal. The charts for the U.S. and the Gulf Coast now show inventory stands far over the goals.

Dollar Index vs. Crude

For the inventory goal, we determined the five-year average inventory position for the first week of October. The chart above shows the current status of U.S. inventory relative to the goal of 67.475 million barrels.

As of the Energy Information Administration’s (EIA) Weekly Petroleum Status Report for week 35 of the year, U.S. propane inventory is at 76.124 million barrels. That is already 8.649 million barrels above the Oct. 1 target, or 113 percent of the target.

Dollar Index vs. Crude

Regionally, Gulf Coast inventory is in great shape. The target was 32.415 million barrels by Oct. 1. Currently, inventory is at 128 percent of the target at 41.561 million barrels. That is 9.146 million barrels above the five-year average, with the likelihood of an increase by the first week of October.

Dollar Index vs. Crude

Midwest inventory remains below its 27.538-million-barrel-target at just 25.590 million barrels. That is 93 percent of the target, or 1.948 million barrels short. As we saw with this last report, inventory builds are slacking off, with demand starting to pick up. It could be difficult for Midwest inventory to get to its five-year average over the next four weeks. Midwest inventory built 464,000 barrels last week, so four more builds like that would put inventory just under the target.

Despite the potential shortfall, Midwest inventory is 3 million barrels higher than it was at this point last year. With robust production, the supply situation even in the Midwest looks encouraging. Obviously, we would prefer the inventory positions to be more balanced regionally, with a little less in the Gulf Coast and more in the Midwest. For now, we will settle for a better situation than last year.

As we said last week, all the inventory in the world means little if logistical issues occur when getting the propane where it is needed. The propane industry is still at a high risk for local wet barrel shortages due to the closing of the Cochin Pipeline out of Canada and the TEPPCO pipeline out of Mont Belvieu.

But as we recall, last year a shortage of barrels in Conway eventually led to a huge price spike. There was always plenty of supply in Mont Belvieu, so the price spike in Mont Belvieu itself was much less. Yet local markets supplied out of Mont Belvieu saw price spikes nearly equivalent to the prices of local markets supplied out of Conway due to logistical issues.

Although there is still plenty to legitimately worry about concerning infrastructure, the additional 3-plus-million barrels that will be in the Midwest to start the winter lowers the odds (although not as much as we would like) of a supply shortage in Conway and thus lowers the risk of the kind of severe price spike in Conway that was faced last year.

That should mean a propane retailer who is buying on an index or a fixed differential to Conway is at lower risk to the ultra-high prices of last winter. We have been encouraging all retailers to do their best to buy at a fixed differential to the hub from which prices in their markets are based. The potential issue for infrastructure limitations makes this essential for any propane retailer trying to fix a price to customers.

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
We go into this week bullish on propane and neutral on crude. Crude is fundamentally weak, but would get a boost should the ceasefire in Ukraine hold. Propane prices have been supported by what appears to be the preparation for crop drying demand.

Monday: Markets closed for Labor Day.

Tuesday: Data showing weak manufacturing activity for Europe and Asia sent crude tumbling more than $3 per barrel. Propane resisted the fall, but both hubs saw a loss in value.

Wednesday: Data showing strong manufacturing activity in the U.S. helped crude recover most of its loss from Tuesday. Propane was exceptionally strong, outpacing sharply-rising crude to the upside.

Thursday: The EIA reported an above-average inventory build, but that did not keep propane prices from moving higher, even as crude fell. It appeared buying ahead of crop drying might be pushing propane. Crude fell against a rising dollar after the European Central Bank said it was going to lower interest rates.

Friday: Propane gained sharply in early-morning-trade, as buyers found less liquidity in the market than normal. Some of those early gains were given back by the end of the day, but both hubs still posted solid gains. Crude fell once again after a weaker-than-expected U.S. jobs report.

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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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