Trader's Corner
Trial Subscription

View here!

View here!

View here!

View here!

View here!

View here!

THIS WEEK'S TOPIC
PROPANE EXPORTS

Increased exports a game changer for propane prices
By MARK RACHAL
Cost Management Solutions    
Cost Management Solutions

Visit propanecost.com

In recent issues of Trader’s Corner, we’ve focused on the hefty draw on U.S. propane inventory. Since the beginning of the year, total propane inventory has declined 29.601 million barrels. Inventory that stood at 96.341 million barrels during week one of this year is now at 66.740 million barrels.

By comparison, the average inventory draw over the same period during the last five years is 18.002 million barrels. Low prices and less focus on conservation have no doubt had an impact on domestic consumption, but it is difficult to conclude that increased demand from the retail sector is enough above average to cause such high levels of inventory draw. Data from the National Weather Service shows heating degree-days for this year are 17 percent below normal and 15 percent below last year.

Data from December shows petrochemical companies consuming 331,000 barrels per day (bpd) of propane as a feedstock, which is similar to December 2014. Feedstock use of propane was certainly higher in 2015 than it was in 2014, at 356,000 bpd compared to 290,000 bpd, respectively. However, propane producers have supplied more than 500,000 bpd in past months without taxing supplies.

Propane imports during the first seven weeks of this year averaged 141,000 bpd, compared to 140,000 bpd during the same period last year. Certainly a lack of imports is not causing the above-average drawdown in inventory.

So far this year, propane production has averaged 1.640 million bpd compared to 1.535 million bpd last year. The increase in production more than offsets the increased consumption by petrochemical companies, and yet this year’s inventory decline has been 164 percent of last year’s decline.

There is only one input source left in the supply/demand balance that could explain why inventory draws are so much higher this year than in previous years. Exports are up dramatically this year, and new capacity completed at the end of last year seems to have turned the tide on the U.S. propane supply/demand balance.

Featured photo

The last official data on exports for November 2015 showed an export rate of 20.268 million barrels, compared to 12.726 million barrels during November 2014. That was a year-over-year increase of 7.542 million barrels. As the chart above shows, the Energy Information Administration (EIA) projected that exports would be at 21.135 million barrels in December 2015. (Note that EIA projections are generally lower than the actual export rate.)

EIA projected 21.929-million-barrel exports in January. It is projecting 19.656-million-barrel exports for February, or 702,000 bpd, but we have seen industry estimates of as much as 950,000 bpd currently being exported. If that rate were continued for an entire month, it would be 26.6 million barrels. The actual export number for the month will most likely fall somewhere in between the two numbers. In any case, such high export numbers are the reason propane inventory in the United States is decreasing at an exceptionally high rate.
(continued below)

Visit propanecost.com
Find CMS on Facebook Questions? Email CMS Try a 10-day Trial of PPI

Unfortunately, the only thing that will slow down the rate of propane exports is higher prices. In addition, propane production in the U.S. has been on the decline since December. It is currently not on a path to take up the new export capacity. This all points to upward price pressure for propane.

Propane retailers have the tools to protect themselves and their customers from the risk of rising supply prices for up to three years out. At this time, current fundamental trends support considering such protection.


Visit propanecost.com


Visit propanecost.com

CONNECT

Twitter
Facebook
View here!

View here!

View here!

View here!

View here!
WHAT IS COST MANAGEMENT SOLUTIONS?
Market Information Services

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.
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.

Client Services

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
Contact us 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
© 2016 North Coast Media. All Rights Reserved.
Reproduction in whole or in part is prohibited without written permission.