Spent a great deal of time talking with the traders yesterday. In a nutshell, here is what they see (and I can expand more in a phone call)
-Market is way under bought for prebuy, at the dealer level
-Traders, Multistate Coops and Financial institutions are short…some of them are very short..and they are rolling those shorts forward, covering with the current market…so there is huge pent up demand for fourth and first quarter in that community, which dwarfs the first bullet point.
-There is a set up scenario for a wet barrel crisis in the trading community if we get ANY level of grain drying and/or an early cold snap.
-We are at triple the exporting levels now than we were a year ago with more exporting capacity being constructed
-Old import facilities are now being converted into export facilities
-Petchem demand is still incredibly high
-Canadian inventories are extremely low; eastern Canada is virtually out of propane
With so much buying that needs to be done, it will be interesting to see how far propane will fall this spring and summer…the last two dips (the first and third Wednesday in May) have been very short lived and over by noon. Traders feel we are more likely to see the markets spend more time at or over $1.15 than at or under $.85.
Crude oil saw some larger than expected builds this morning in the API report, which is driving this dip in propane. All of those factors listed above are bullish for this buying season…there may be some bears here and there which could move the markets down for a period of time, but it may not last long.