Let’s examine the EIA Report for the week ending 2/2/18
Propane Draw: 4.1M/bbls
Inventory Level: 48.9M/bbls vs 55.8M/bbls same week in 2017. YoY difference of -6.8M/bbls
Production: 1.905M/bpd, up 115K/bpd from last week
Exports: 696K/bpd, virtually unchanged from last week
Demand: 2.007M/bpd vs 1.530M/bpd last week
That demand number…wow. That smells like a correction from a few weeks back, but that’s just my take. That’s the highest demand number we have seen all winter and HDD’s for the reporting week were nowhere near what we experienced in late December and early January.
Exports remain ‘MEH’…much lower than where they were last year; exports were at 1.116M/bpd this week last year. For the past four weeks, we have seen exports average 762,000/bpd vs 1.109M/bpd during the same four-week period last year. That’s a 347,000/bpd difference, which is more than 10M/bbls of propane worth of difference. Yes, demand is stronger this year than last, but as I have written several times in the past, seasonal propane demand is no longer the big dog at the table…exports are. So when exports are off like this, even in the face of a decent winter, export will be what dictates the over-arching and seasonal hub market volatility or in the case of this winter season, the lack of it.
Speak of the hubs, I wrote something yesterday that talked about the price bloodletting taking place there right now, which has also spilled over into off-hub locales and terminals. You can read it at this link.
The gist; I think it’s fairly safe to assume that we have experienced the high prices for this winter….and possibly even for the year of 2018. The majority of winter is behind us and while there still may be some cold days in our future, depending on where the Polar Vortex goes after its impending split, there isn’t much left of winter. The first half of March looks promising for demand as well and I am not saying demand is just going to disappear.
But on the trajectory of prices, I don’t believe there is much of a reason for traders to fear inventory concerns…certainly not at Mt Belvieu.
So lacking those concerns, you get more sellers than buyers…and you get a market that has shed over $.2100/cpg since January 2nd, which has what has taken place at Mt Belvieu and nearly $.2800/cpg at Conway.
“Hey Jon, is it time to start thinking about propane contracts for next year?”
Yes…yes it is.