US Export Growth Propels Propane Prices

Copyright © 2021 Energy Intelligence Group

North America’s propane market is tightening dramatically just ahead of an anticipated seasonal spike in regional demand. According to the US Energy Information Administration (EIA), inventories of propane are currently at 66.8 million barrels, down 22.5 million bbl from the same time last year. Canadian stocks are also low. There are colliding factors informing the tightness: upstream caution and discipline juxtaposed with exports going gangbusters. The result is soaring prices -- in Edmonton, Canada, propane is spiking at roughly four times last year’s level just south of $1 per gallon, while prices at Conway, Kansas and Mont Belvieu, Texas are well over $1/gallon. Costs could continue to rise as the US is set to enter crop drying season and North America enters heating season shortly thereafter. Propane is a crucial fuel for both. Over There For the tightness in the US propane market, “the culprit, of course, is exports,” noted RBN’s Housley Carr in a recent research note. To wit, the first week of August saw record US product exports of 6.4 million barrels per day, with propane accounting for some 21.9% of the total. This past week, outright propane exports dipped to 1.1 million b/d, 22% of the total. One ship broker said that August fixtures from the US are looking strong, particularly for liquefied petroleum gases (LPGs) such as propane. Data from tracking firm Kpler suggest near-record US LPG exports of some 1.8 million b/d, although the outlook for September is lower. The bulk consists of propane. Analysis by Energy Intelligence show most LPG exports go to Asia-Pacific, with the remainder largely going to other countries in the Americas. Kpler data suggest that dynamic continues to hold true. Riding the Brakes Strong price signals are not yet resulting in significant incremental propane supplies. In part this is down to logistics and costs, and in part this is a result of general upstream strategies. “Increasing production is typically a lengthy, complex and expensive process involving producers drilling new wells to yield more liquids-rich natural gas and crude oil,” according to Martin King of RBN. In both the US and Canada, upstream players are keeping their powder dry. The production side of the petroleum business has yet to fully recover from the impacts of the Covid-19 pandemic, and both upstream and downstream North American players have been adamant that they are waiting for global demand to recover ahead of opening the taps. Production of natural gas and crude oil -- especially in some shale plays -- yields significant volumes of natural gas liquids (NGLs) (OD Jul.30'21). These are identical to LPGs on a molecular level, and differ only in their provenance -- the former from the wellhead, the latter from a processing plant. As far as crude output is concerned, some market players say virtually all the growth to be expected this year has already happened (OD Aug.4'21). Frans Koster, New York

Bulls and bears are wrestling for control of the US gas market, with strong tailwinds for both leading to volatility not seen in years.
Fri, Oct 22, 2021
Petroleum markets keep rising, with indicators suggesting the rally may continue to surge.
Fri, Oct 22, 2021
Fading hopes that US inventories will enter the winter at a significant deficit to seasonal norms has bulls and bears wrestling for market control.
Fri, Oct 22, 2021