Propane Inventories 20M Barrels Below March of 2016

Propane inventories drew 1.5M/bbls this week, according to the EIA report just released this morning. Exports were back up to 949,000/bpd, an increase of 141,000/bpd over last week’s number.

National inventory levels now sit at 42.8M/bbls, which is exactly 20M/bbls lower than where inventories were one year ago this week (62.8M/bbs).

I hate to do this, but let me remind you that the eastern two-thirds of the United States just experienced one of the warmest winters on record.

Keeping that in mind, allow me stack up a few facts for you, which should be as jaw dropping to you as they are to me and then even more so in the context of how mild this winter was.

Inventories are 20M/bbls lower year over year: 20M/bbls may not have much meaning to you without context. Consider that when the industry experiences a weekly draw of 5M or more barrels, people like me write about how such a draw is one of the Top 20 largest weekly draws of all time. 20M/bbls would be four weeks worth of such draws, or one month of supply with incredibly strong drawdown rates. Considering we have never seen inventories draw down over 20M/bbls in any one month in history, 20M/bbls is likely five to six weeks worth of supply.

That means we are a month to a month and a half ‘shorter’ on inventory leaving this winter than we were one year ago. As I have been writing, it will be incredibly important in the coming weeks to see the rate of inventory building we will have, because if we get into September and October of 2017 and inventories build back to being 20M to 25M/bbls below where they were entering the last two winters (104M/bbls), propane prices could spike much higher than what people can pay for them right now.

In this day and age of gonzo propane exports, would you feel comfortable with the industry’s ability to supply itself with a month to a month and half less supply available for us? I wouldn’t, and neither would most people in this business. Again, please keep an eye on this aspect of things, as IT MEANS EVERYTHING for the coming year.

We Had Two Record Draws This Winter: In this ‘winter that wasn’t’, we had two weekly draws that totalled 6.9M/bbls and 7.4M/bbls, respectfully. We’ve also drawn down more than 60M/bbls of propane inventory this winter season, which has never happened before.

This year’s drawdown is 50% GREATER than the drawdown of the winter of 2013-2014, which included near-record grain drying demand, early onset cold and multiple cold outbreaks including a nice long visit from the real Polar Vortex.

We drew down just over 40M/bbls that season…this year over 60M in one of the most mild winters on record.

Propane prices are up nearly five cents from where they began this week in Mt Belvieu and Conway. I think we’ll see another slow pullback, but each Wednesday going forward has the ability to have an impact on prices, as we see just how much exports will hold up this spring and summer, which impacts how much inventory we will be able to build back.

Jon Miller

Follow me on twitter @PropaneBuzz

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