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December cover


US inventory falls, exports rise
to record level in late December
LP Gas magazine    
Cost Management Solutions


The U.S. domestic propane market continues to change. That's the message from ICF International in a guest column written for LP Gas magazine. Check it out here.

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The column's authors, Mike Sloan and Eric Kuhle, note how U.S. propane exports averaged more than 750,000 barrels per day (bpd) through October 2016 – an increase of 27 percent over 2015. This amounts to about 11.5 billion gallons of propane exports per year, compared with a consumer propane market of about 8.5 to 9 billion gallons per year, they write. Moreover, growth in U.S. propane export capacity is further evidence that propane producers are finding more opportunities in international markets than within the United States.

What does this mean for U.S. propane retailers? While some companies added bulk supply capacity and diversification after the 2013-14 winter – one in which we saw regional supply and distribution challenges and price spikes – the ever-increasing tie between U.S. propane markets and those abroad has the potential to add risks for retailers, ICF International says. These risks include supply challenges and more volatile prices. That's because the state of the U.S. propane market is becoming more dependent on demand factors internationally.

Demand factors here and abroad recently, including the economy and weather, have kept propane inventory levels high and prices low, seemingly showing no cause for concern on the part of U.S. propane retailers. But that could all change based on the internationalization of the propane market, ICF International writes.

It's hard to imagine Europe or Asia impacting how U.S. retailers do business in their local communities, even in small towns across rural America. But what's happening in the propane market worldwide, with those events impacting us domestically, is real and worth our attention.
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U.S. propane inventory and exports

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A look at U.S. Energy Information Administration (EIA) data might already show this global trend taking place.

For example, EIA reported U.S. propane inventory falling 5.7 million barrels for the week ending Dec. 23 to 86.9 million, 11 percent lower than a year ago. Most of this decline, 4.4 million, occurred in the Gulf Coast region. It’s interesting to note that last year at this time U.S. propane inventory actually gained slightly.

It’s difficult to ignore the timing of the propane inventory drop and a sharp uptick in U.S. propane exports at the end of December. According to EIA, the United States exported a record 1.3 million bpd for the week ending Dec. 23. That’s up more than half a million bpd just from the beginning of December.

That leads us to the latest development in U.S. propane exports – the Dec. 16 opening of Phillips 66’s Freeport (Texas) LP gas export terminal. The export terminal can simultaneously load two ships with refrigerated propane and butane at a combined rate of 36,000 barrels per hour or about 150,000 bpd, according to Phillips 66.

So the numbers and news we’re sharing in this week’s Trader’s Corner offer real reasons for retailers to keep pace with what’s happening in the industry and adapt where necessary. Know that export markets can become a higher priority for producers than the domestic market. And work with your suppliers and industry partners throughout the year to help keep your business and your customers secure amid this changing market.

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