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DIGITAL EDITION
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THIS WEEK'S TOPIC:
PROPANE SUPPLY
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Propane supply growth
begins to slow
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U.S. propane/propylene supply growth is slowing. Propane/propylene supply is setting new five-year highs with each passing week, but it appears to have peaked at 2.361 million barrels per day (bpd) during the week ending Aug. 2. Since then, production has been in a general decline.
Click to enlarge. Image: Cost Management Solutions
For the week ending Oct. 25, production was 2.084 million bpd, down 277,000 bpd from the August peak. It appears that the decreased drilling activity for natural gas is finally translating to lower growth in propane supply. The slowdown in supply growth comes as new propane export capacity is coming on line.
We have yet to see an impact from the new capacity, but it is getting close to being fully available. This past week’s export rate was up 268,000 bpd, but that just took it to 1.222 million bpd, which is close to the maximum sustainable export rate before the expansion.
The new export capacity means that operable export rates over 1.3 million bpd should be attainable. Saudi Arabia raised its crude price for November, which should raise natural gas liquids values from there as well. That could drive more buyers to U.S. ports for supply just as domestic heating demand picks up. There have already been small declines in U.S. propane inventory.
Click to enlarge. Image: Cost Management Solutions
If exports do indeed pick up and run closer to the new capacity, then there could be solid draws on inventory this month. Unless crude continues to fall and becomes too much of a drag for propane markets to ignore, there is a reasonable chance for more upward pressure on propane values.
Propane inventories remain high, but the shift in the supply growth trend and more export capacity could be flagging a change. Perhaps not a seismic change that is going to cause prices to surge. Instead, it is likely to be a slow trickle that sees propane values improve over a longer horizon.
If the trend continues, there could be more hedging activity from retailers as they try to get ahead of a rebound in propane’s value.
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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
- 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:
- 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
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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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