NOTE: Monday, October 15th is a big day for The Propane Buzz, as we will be releasing a TON of information pursuant to the Winter of 2018-2019. I will be interviewing Michael Clark of BAMWx.com, our meteorological business partner, and providing you with a detailed video breakdown of their thoughts for the coming winter, including their forecast. I’ll also follow that video up with a detailed write up. This time of year, I send out BAM forecasts each and every day and for a propane retailer, this type if intel is so crucial to your business. More on all of this Monday.
Propane built 1.5M/bbls for the first week of October, according to the EIA report release minutes ago. While I wrote last week that we could see builds over the first two weeks of October, this build comes at a time when the overall marketplace is very soft, and could have more downside impact on propane prices, especially in Mt Belvieu, where much of the build took place.
Exports dropped to a reported 666,000/bpd, down from over 900,000/bpd. Production was at or near all time highs of 2.025M/bpd…the cold that is in the forecast will likely stem builds beyond next week’s reports, but we are now over 80M/bbls of propane and 1.3M/bbls ahead of the pace from last year at this time.
Crude oil built nearly 6M/bbls while Cushing, OK stockpiles added over 2M/bbls. Crude was trading down nearly $1.50/bbl at the time of this email, as it has been in a steady downward cycle all week long.
MTB October propane has traded below $1.00 today, but Conway has traded north of $.8300, something we have not seen since January.
This headline is dour, from Reuters: ‘Global Economy Falters as Politicians Take Expansion for Granted‘. From the item:
Storm clouds were building over the global economy, even before the brutal sell off in stock markets during the last 24 hours. Escalating oil prices, rising interest rates, an appreciating dollar, and growing uncertainty about the outlook for international trade are proving a poisonous cocktail for global growth and have been triggered crises in the past.
Economic growth and corporate earnings have remained strong in the United States but in much of the rest of the world momentum has been slackening since the start of the year. Strong and synchronised growth in 2017 has been replaced by an unbalanced expansion that increasingly relies on U.S. consumers and businesses to be sustained.
Crude inventories are building a brisk pace…outpacing market expectations. Fears over the cuts in Iranian crude oil sales have moved to the backseat. The market seems to have lost its supply side concerns and the focus seems squarely on prospects of ebbing demand and a global economic slowdown.
The secret pact between the United States, Russian and Saudi Arabia really threw the marketplace for a loop the last week. Crude was down below $71/bbl on 9/21…then it rose to as high as $76.31 on 10/3…then late on 10/3, news came out that there was that secret deal for Russia and the Saudi’s to increase production…and the markets have been in a free fall since, the crude markets along with Mt Belvieu propane. We’re talking over a dime downside on the MTB outmonth curve, if not more.
Meanwhile, Conway has been gaining strength in the front months and the differential between Conway and MTB is now down below $.1600 cents where it was nearly $.3200 just 11 days ago. There has been a healthy amount of Conway buying in the front month (not so much out the curve) as bigger players are buying the fronts and likely plan to roll those into the winter, hoping for demand and higher spot prices once we get into Dec-Jan-Feb.
For me, 2018 will be remembered as the most volatile year I can recall that had next to nothing to do with true supply and demand fundamentals. I also feel this type of volatility is here to stay in our industry, given that propane is truly a global commodity now…which means propane retailers will need to either spend more time on propane price risks, or have someone like The Propane Buzz on their team helping to do that for them, suggesting the best strategies available to mitigate risk and peeling back the curtain on the industry to show you ways you can instantly add two to six cents per gallon of margin back into your business, and then some.
We’re always a phone call or an email away.