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May cover


Propane inventories and their effect on prices
Cost Management Solutions    
Cost Management Solutions
Eight weeks ago, propane inventory reached its low for the year at 53.744 million barrels.

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The end-of-winter position for 2015 was the highest on record. Prior to this year’s end-of-winter inventory low of 53.744 million barrels, the highest end-of-winter inventory low was 42.187 million barrels in 2012.

Since ending winter with an exceptionally high inventory position, propane inventory has risen at an above-average pace. In just eight weeks, U.S. propane inventory is up 12.772 million barrels, or nearly 1.6 million barrels per week.

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Over that last couple of weeks, the rapid inventory builds have caused propane prices to diverge from crude prices, which propane prices had been following tightly. Propane prices had held up well coming out of winter, despite the record-high inventory based on speculation that inventories would build at a slow pace this summer due to lower production, higher exports and increased use by petrochemicals. However, the slow builds have yet to develop and propane traders eventually had to trade the fundamental realities.

At the beginning of the inventory build period each Thursday, we send our daily reads charts that show how inventory stands relative to the five-year start of the winter position. As the charts below show, it is a bearish situation right now.

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U.S. propane inventory stands at 66.516 million barrels, just 2.516 million barrels below the average inventory position at the first week of October from 2010 to 2014. On May 1, inventories were already at 96.36 percent of the five-year average for starting winter.

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U.S. inventory only needs to build 114,000 barrels per week over the next 22 weeks to reach the average by the beginning of winter. Over the past five years, the average weekly build during that time has been 1.416 million barrels. Last week’s build was 1.849 million barrels.

In the past four weeks, inventory has averaged building more than 2 million barrels per week. That is the reality that propane markets have been forced to trade. Inventory builds will have to change quickly if we are to avoid another record inventory position for the start of next winter. Until that change occurs, the reality is this is a bearish propane price environment.


Propane prices continued to separate from crude, as rising inventory continued to set a bearish tone for the market. We remain bearish for propane and neutral for crude. Crude is at a critical point. If it shows more weakness early this week, we could see a significant profit-taking correction occur.

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Last Week's Highlights
Sharp drops in propane prices occurred to start the week, as propane traders became more focused on bearish fundamentals. A firmer dollar encouraged profit taking on recent gains in crude.
Propane prices recovered some of their Monday losses, as crude prices gained at a steady clip. The U.S. dollar once again turned lower, which caused crude prices to reverse course. Both Brent and West Texas Intermediate (WTI) closed at new highs for the year.
More losses for propane after the Energy Information Administration reported a 1.849-million-barrel build in U.S. propane inventory. Rapidly rising propane inventory has supplanted crude as the driving force behind propane price changes. Crude prices gained on a 3.882-million-barrel draw in U.S. crude inventory, the first decline in four months.
The downward trend in propane prices accelerated dramatically, as the fallout from high inventory positions continued. Crude also tumbled, lending to the rout in propane. A jump in the dollar and more focus on weak fundamentals had crude lower.
Conway propane prices bumped up slightly after getting absolutely hammered this week. Mont Belvieu propane continued to trend lower. Crude prices became very volatile on technical trading, with WTI up slightly and Brent lower.

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Market Information Services

The Propane Price Insider is an e-mail service that provides:
  • Three daily price Flash Wires
  • Periodic option quotes
  • Wednesday inventory data updates around 11 a.m. ET
  • Evening report with executive summary, weather maps and complete review of energy prices that are based on propane's Btu equivalent
For a free 10-day trial subscription by e-mail, sign up online here or call 888-441-3338.
Unbiased Analysis

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.

Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.

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