That is a tricky question but one a lot of people are asking it.
For one, it’s easier to answer this time of year when there is cold weather (which is gripping the middle part of the country right now) on the heels of impressive grain drying in the Midwest and three consecutive inventory draw downs in the Gulf. This, on top of low inventory levels in the Midwest. Take a look at this graphic on inventory levels (click to enlarge):
Those of you in the Dixie, this could impact your prices too, so don’t hit delete button
We’re at 18.4MM at the end of November. That’s the lowest end of November inventory level in the last five years by a minimum of 3MM. This includes 2009, the last time we saw grain drying demand as strong as we saw it this year. Just looking at history, it’s not crazy to think we could be 10MM in Conway at the end of January, which would create a great deal of pricing drama, to be sure. I have attached a PDF that will show what our inventory number might look like at the end of January if we apply five year average draw downs November to December plus December to January. SPOILER: It’s 9.2MM..that’s danger zone. It’s 4MM below the lowest end of Jan number we’we’ve had in the last five years…that year was January of 2010, following the grain dryer year of 2009. The monthly average price in Conway for January 2010: $1.3103, or just a few cents higher than where Conway is right now.
Don’t forget the 50Kbbls/day that will be heading south out of Conway beginning in January…the Southern Hills Pipeline has not been in the market before and therefore not factored in to any of the numbers above.
Crude oil is rising now as refinery runs increase and that looks to be in place for the foreseeable future. The early winter weather trends seem to be favoring at least a normal winter for most of the nation, if not a bit colder.
Then we have the following….I received an email this morning from a company who is bringing a cargo ship into the Northeastern market. They are looking for commitments for some of the gallons…the asking price? $2.35/gallon…in Rhode Island. Two things here…one is this is another example that American propane prices are the cheapest in the world and why exporting has been such a factor in the marketplace this year and will be. This price is based off a spread between Belvieu and Northwest Europe. Second, if propane gets sold for this much in the Northeast, that’s where rail cars are going to go. That’s where long haul trucking comes into play. This puts price pressure on everyone.
Do I think prices will remain strong? Yes I do.