Things are a bit sideways today with stronger economic news. Crude was off a bit this morning but propane didn’t blink for the first few hours. Crude is back around even on the day.
One thing I overheard this morning here on our trading floor was this: “The prices are this high, and it’s August.” I chewed on that for a bit and it did resonate with me. Not sure how you feel about it.
Here are the bears I see in the market:
-Last year, we saw soft early winter prices. This isn’t a fundamental factor, rather an emotional one, but a reminder.
-There is more propane production in this country than ever before.
-The Southeast shows solid inventory levels
Here are the bulls I see right now:
-Overall, inventory levels beneath five-year averages
-Several major players, including those just trading propane paper, have massive short-covering to do. It’s akin to everyone being at the same red light waiting for it to turn green…and there is still a lot of buying left to be done by people who are actually going to be using the product.
-Outmonths are not all that discounted from current months, setting things up for wet barrel premium and crunch (more on that in a sec)
-Propane’s relation to crude is still around 40%, well beneath historic average
-Petchem consumption at record high levels
-Exporting at record high levels
-We’re two months away from the possible start of heating season in large swaths of the nation, even less than that farther north
I am not saying either one of these lists is all there is to it, but I remain more bullish than bearish.