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 the good news for Midwest propane inventory.

This week, Midwest propane inventory hit a milestone by moving above its five-year average inventory position for week 37 of the year. Midwest inventory increased 1.121 million barrels last week, about two times its normal build for week 37. It was the second week in a row of above-average builds that quickly erased its deficit.

Midwest Propane Inventory

In fact, after a troubling few weeks in June and July, Midwest inventory builds generally have been above average.

We have been monitoring inventory builds each week during the inventory build period. We suggested a good goal for inventory would be to reach the five-year average at the first week of October. With inventory now above average and a few more weeks of potential inventory building to go, that goal looks doable.

Midwest Inventory Position

Midwest inventory is now at 99 percent of the five-year average, first-week-of-October target. Inventory only needs to build another 189,000 barrels to hit the target. With any luck, will begin the winter above the five-year average.

Perhaps more encouraging is how inventory compares with last year. Week 37 of last year’s Midwest inventory was 22.741 million barrels compared with the current inventory of 27.349 million barrels, a 4.608-million-barrel year-on-year improvement.

Propane traders have obviously been relieved by the good builds, as the short-term price chart below shows the softening of Conway propane prices since this week’s inventory build was reported.

Crude and Propane Closing Prices

As the price chart above reveals, Conway and Mont Belvieu propane prices were even as recently as Sept. 8, but now Conway is trading at a 2-cent discount to Mont Belvieu.

There still will be logistical issues to overcome this winter in the Midwest. The loss of the Cochin Pipeline certainly will be felt. We are not getting a good feeling about the progress of rail projects to offset those supplies. The Cochin is now carrying diluents from the U.S. to Canada.

Of course, farther south the industry will be dealing with the loss of the TEPPCO 16-inch line for the second winter. The first year without that line didn’t go so well. It used to be in propane service, carrying supply from Mont Belvieu to Selkirk, N.Y., and points in between. That line is now flowing south to carry ethane from the Marcellus and Utica production fields to the Gulf Coast.

Despite these ongoing challenges, starting the year with more propane inventory in the Midwest is a positive. With estimates that 12.6 million barrels of propane will be needed for this year’s crop drying, no amount of beginning inventory appears to be too much.

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 begin the week neutral on propane and bearish on crude. Propane prices adjusted lower after last week’s inventory build, but seasonal factors should keep prices supported in the short term. Fundamentals are working against crude.

Monday: Propane prices were firm to start the week, with the previous week’s surprise inventory draw continuing to be supportive. Crude was up on opportunity buying as it neared the year’s low. More weak Chinese economic data limited the upside.

Tuesday: Crude prices spiked on comments from Organization of the Petroleum Exporting Countries’ (OPEC) secretary general that the cartel would cut its production target by 500,000 barrels per day at its November meeting. Propane prices kept running higher with Conway catching up a bit after being left behind on Monday.

Wednesday: The Energy Information Administration (EIA) reported a 1.4-million-barrel build on U.S. propane inventory, most of it in the Midwest. Crude inventory also increased. Propane was down sharply post report. Crude prices also fell into negative numbers.

Thursday: Propane prices continued to give up the gains it had made after the EIA reported a surprise draw on propane inventory a week prior. Crude fell sharply as demand concerns once again dominated the market.

Friday: Propane prices moved lower to end the week. West Texas Intermediate crude fell on demand worries, while Brent posted a gain with lost supplies from Libya a factor.

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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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