DIGITAL EDITION THIS WEEK'S TOPIC: PROPANE INVENTORY How Canadian propane inventory affects the U.S. By MARK RACHAL Cost Management Solutions     As the core winter season approaches, propane inventory levels in Canada are slightly below average. The Canadian inventory position is in stark contrast to the record-high levels of propane inventory in the United States. Like U.S. propane inventory, Canadian inventory set five-year-high marks last winter. However, the rate of build in inventory through spring and summer was below normal. This is mainly because Canadian producers were ahead of the curve anticipating where the market was going to be this winter. Consequently, they were aggressive in exporting their production. Since February, Canadian producers have exported above-average amounts of propane to the U.S. In fact, from March through September, exports to the U.S. set five-year-high marks. From January through October (last official export data), Canadians exported 32.251 million barrels of propane to the U.S. That was the highest amount during that time frame since 2007. In 2014 during the January-through-October period, exports to the U.S. were at 26.282 million barrels. Year-over-year exports increased by about 6 million barrels during that time. Given the jump in exports, it is easy to see why Canadian propane inventory is currently 3.592 million barrels less than it was last year. The bottom line is that in North America propane flows south to the export terminals and petrochemical complexes of the Gulf Coast. Canadian production/exports displace Midwest production, causing more production to move to the Gulf Coast. If petrochemicals and exports do not match increased production and barrels moving into the Gulf Coast, then inventory accumulates. (continued below) The inventory certainly did accumulate this year to the tune of a record 64.851 million barrels reaching the Gulf Coast. That record-high Gulf Coast inventory represented the bulk of the 106.202-million-barrel record U.S. propane inventory reached during the week ending Nov. 20. The big question going forward is whether the Canadian market will need to send as much production south. Natural gas production primarily drives propane production. For the week ending Dec. 23, 82 rigs were drilling for natural gas in Canada, down from 162 rigs during the same week last year. If Canadians don’t produce as much propane, then they don’t displace as much Midwest propane production, causing fewer barrels to accumulate on the Gulf Coast. Combine decreased drilling activity in Canada and the United States, and it is easy to see a scenario of decreased propane supplies. For the week ending Dec. 23, 162 rigs were drilling for natural gas in the U.S., down from 340 rigs during the same week last year. Producers are only drilling their very best projects, so it is difficult to estimate how much the decreased drilling activity will affect natural gas and propane output. However, one must be vigilant in closely monitoring natural gas and propane production in 2016. Otherwise, one just might be caught wondering what happened to the record-high propane inventory that was present on the Gulf Coast. CONNECT WHAT IS COST MANAGEMENT SOLUTIONS? The Propane Price Insider is an email 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 email, sign up online here or call 888-441-3338. 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. Dale G. Delay, 888-441-3338 ddelay@propanecost.com Mark Rachal, 888-441-3338 mrachal@propanecost.com Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision. We offer: Detailed market recommendations on hedge and pre-buy entry points Prompt market execution of hedging strategies Supply cost analysis and recommendation as to effective hedging strategies Large volume consideration when we place your hedges GOT STORY IDEAS? Email Brian Richesson, Editor in Chief LOOKING FOR ADVERTISING OPPORTUNITIES? Email Brian Kanaba, Publisher You are currently subscribed to Trader's Corner as %%EMAILADDR%%. Forward to a friend  | Change your subscription preferences  |   New subscriber sign-up If you wish to leave this mailing list, simply unsubscribe. | Refer to our Privacy Policy. LP Gas Magazine is a division of North Coast Media LLC. 1360 East 9th St., Suite 1070, Cleveland, Ohio 44114 © 2015 North Coast Media. All Rights Reserved. Reproduction in whole or in part is prohibited without written permission.