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THIS WEEK'S TOPIC:
PROPANE INVENTORY
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A look at current propane inventory conditions
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For the fourth week in a row, the Energy Information Administration (EIA) reported a below-average build in U.S. propane inventory. The build was 1.579 million barrels; compare that with 1.655 million barrels, the five-year-average build for week 26 of the year. Once again, the EIA estimated propane exports at 600,000 barrels per day (bpd), and that was the key reason another light inventory build occurred.
However, propane markets did not rise following the report. In fact, both Conway and Mont Belvieu prices fell. The inventory miss really wasn’t that big, and last week there was more of a downward correction in crude underway.
What’s more, propane inventory is at record highs.
Last year, the highest inventory position the EIA reported was 81.612 million barrels. However, that inventory was not reached until mid-October. At 83.547 million barrels, current inventory is already 1.935 million barrels higher than that level. There should be at least 13 or 14 more weeks of inventory builds.
Even at the current four-week trend of below-average inventory builds, 90 million barrels of inventory would be easily reached. What’s more, we know propane retailers are getting a lot of really good deals on spot loads, and many are taking advantage of the fire-sale prices. We will speculate that means more secondary (retail level) and tertiary (customer level) storage is getting filled. If that theory turns out to be true, then we could also see slow draws on inventory this fall.
Obviously, propane demand will be picking up from this point through the end of the year. Crop drying, winter heat load, petrochemical use and increased export capacity will all be chipping away at inventory levels. But if the mountain of inventory that’s being built now is going to be chipped away, all of the demand areas had better plan on coming early and staying late.
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WEEK IN REVIEW
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Propane prices gained slightly for the week. Continued light inventory builds were supported. However, weaker crude and high inventory levels limited the upside.
Crude prices slipped as technical, geopolitical and fundamental factors all conspired to put downward pressure on prices. How crude trades this week will depend on the outcome of the Greek referendum on whether to accept outside financial support, and the progress on the Iran nuclear talks.
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LAST WEEK'S HIGHLIGHTS
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No weekly highlights due to the July Fourth holiday.
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CONNECT
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WHAT IS COST MANAGEMENT SOLUTIONS?
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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
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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.
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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.
Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.
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Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.
We offer:
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Detailed market recommendations on hedge and pre-buy entry points
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Prompt market execution of hedging strategies
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Supply cost analysis and recommendation as to effective hedging strategies
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Large volume consideration when we place your hedges
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GOT STORY IDEAS? Email Brian Richesson, Editor in Chief
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