Propane Goes Into Winter in Rough Balance

  1. U.S. propane inventories at one hundred million barrels
  2. Demand for propane heightened by crop drying
  3. Propane production has more than doubled since 2008
  4. December natural gas futures 15 cents higher than November price

Al pic 2009_cropped

Alan Levine, Chairman of Powerhouse
 
 

The Matrix

Propane/propylene inventories in the U.S. have stood at 100 million barrels since the week ending September 13. (Propylene constitutes about 5% of the total stock level of these products.)

Generally, propane supplies top out around this time of year. Maintaining this level of stock is noteworthy since demand has been moving higher since May. Demand for propane reached a bottom of 600,000 barrels per day at that time. This low has not been seen since before 2005.

Average US Propane Supplied 2005 – 2019 source: EIA

The strength in propane demand reflects needs to meet crop drying. And this year, anecdotal evidence suggests that crop drying is very robust. Moreover 2019 stock levels are more than 20 percent higher than last year at this time.

Propane has become a significant contributor to U.S. export markets. Exports compete with the amount available to domestic demand. The Energy Information Administration has compiled statistics showing the growing importance of propane export markets.

Monthly US Propane Exports 2015 – 2019 Source: EIA

Propane exports have doubled since 2015. Send-out of propane ran about 600,000 barrels daily in that year. Most recently, exports reached about 1.2 million barrels per day. Factories in Asia and Europe use U.S. propane as a petrochemical feedstock.

Competition for U.S. propane must raise concerns for availability going forward. The United States has experienced an increasing supply of crude oil production and, necessarily, increased output of associated natural gas. The accompanying chart shows an impressive increase in propane output.

Propane production was 840,000 barrels daily in October 2008. Most recently, production has more than doubled, now at 2.125 million barrels per day. EIA puts domestic propane demand at 1.2 million barrels daily. The balance between propane supply and demand suggests a rough balance for the winter to come. (Of course, local conditions could alter the situation. Traders would see that in price basis.)

4 Week Avg US Propane Production 2005 – 2019 source: EIA 

Supply/Demand Balances

Supply/demand data in the United States for the week ending Oct. 18, 2019, were released by the Energy Information Administration.

Total commercial stocks of petroleum fell by 9.0 million barrels during the week ending Oct. 18, 2019.

Commercial crude oil supplies in the United States decreased 1.7 million barrels from the previous report week to 433.2 million barrels.

Crude oil inventory changes by PAD District:
PADD 1: Minus 0.4 million barrels to 10.8 million barrels
PADD 2: Plus 1.5 million barrels to 129.9 million barrels
PADD 3: Minus 3.7 million barrels to 223.2 million barrels
PADD 4: Plus 0.4 million barrels to 21.6 million barrels
PADD 5: Plus 0.4 million barrels to 47.5 million barrels

Cushing, Oklahoma inventories rose 1.5 million barrels from the previous report week to 44.5 million barrels.

Domestic crude oil production was unchanged from the previous week at 12.6 million barrels per day.

Crude oil imports averaged 5.857 million barrels per day, a daily decrease of 438,000 barrels. Exports rose 435,000 barrels daily to 3.683 million barrels per day.

Refineries used 85.2 percent of capacity, up 2.1% from the previous report week.

Crude oil inputs to refineries increased 429,000 barrels daily; there were 15.865 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 395,000 barrels daily to reach 16.012 million barrels daily.

Total petroleum product inventories fell 6.7 million barrels from the previous report week.

Distillate fuel oil stocks decreased 2.7 million barrels from the previous report week; distillate stocks are at 120.8 million barrels. EIA reported national distillate demand at 4.076 million barrels per day during the report week, a decrease of 289,000 barrels daily.

Propane stocks decreased 0.5 million barrels from the previous report week; propane stocks are 100.0 million barrels. The report estimated current demand at 1.277 barrels per day, an increase of 224,000 barrels daily from the previous report week.

 

Natural Gas

Natural gas traded in sympathy with liquids in response to the military action in Saudi Arabia. Prices fell rapidly after testing a high of $2.70, bottoming around $2.21 before a short-lived relief rally. Prices since are trading in uncertain conditions.

According to the Energy Information Administration:

Net injections into storage totaled 87 Bcf for the week ending October 18, compared with the five-year (2014–18) average net injections of 73 Bcf and last year’s net injections of 62 Bcf during the same week. Working gas stocks totaled 3,606 Bcf, which is 28 Bcf more than the five-year average and 519 Bcf more than last year at this time.

The average rate of net injections into storage is 27% higher than the five-year average so far in the refill season (April through October). If the rate of injections into storage matched the five-year average of 8.8 Bcf/d for the remainder of the refill season, total inventories would be 3,720 Bcf on October 31, which is 28 Bcf higher than the five-year average of 3,692 Bcf for that time of year.

 

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