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DIGITAL EDITION
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THIS WEEK'S TOPIC:
PROPANE SUPPLY
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US natural gas production rises, increases propane supply
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The Energy Information Administration's official monthly data for May 2018 natural gas production showed an output of 2.68 billion cu. ft. That is about 86.5 million cu. ft. per day.
Click to enlarge.
U.S. natural gas production is rising, with growth coming from the seven major shale plays in the United States. Rising natural gas production is the engine for growth in propane supply. About 80 percent of U.S. propane now comes from natural gas processing, and the remaining is a byproduct of crude oil refining.
Propane supply from refineries has been fairly flat in recent years. Increases from natural gas processing have totally changed the supply landscape.
Click to enlarge.
The chart above shows the growth in propane supply from natural gas processing. Growth in supply has been quite pronounced since the middle of last year due to a surge in natural gas drilling and output.
The United States became a net exporter of propane in 2010. Exports were more than 330 million barrels in 2017, compared to just 15 million 10 years ago. Propane exports exceeded imports by more than 283 million barrels last year.
With the push to increase U.S. liquefied natural gas exports, U.S. natural gas production is expected to continue to rise. This means the U.S. propane supply will remain at a level higher than can be consumed domestically, so exports will be the key mechanism for supporting prices. The high rate of production, resulting in the major oversupply for the U.S. domestic market, makes propane inventory positions far less critical than they were when the U.S. needed imports in the winter to augment U.S. production in meeting domestic demand.
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For the foreseeable future, propane supply will be much higher than domestic demand. That doesn’t mean logistical issues – or even too aggressive of exporting activity – can’t result in tight domestic supplies from time to time, especially in local markets.
Building supply allocation, having alternative supply points, and the flexibility to buy at posting or on prices indexed to the major hubs all remain important in managing propane supply risks.
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WHAT IS COST MANAGEMENT SOLUTIONS?
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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
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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 email, 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
LOOKING FOR ADVERTISING OPPORTUNITIES? Email Brian Kanaba, Publisher
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