Propane inventories drew 1.3M/bbls for the week ending November 30th, 2018. This puts us 5.3M/bbls over last year’s levels at the same time frame. National stocks sit at 79.8M/bbls right now.
The Midwest saw an 800,000/bbl draw, which is a fairly sizable draw for this time of year. Earlier this morning, the East Leg of the MAPCO pipeline went on allocation. Midwest inventories for this week last year were at 25M/bbls and they stand at 25.2M/bbls right now. The Gulf actually built 100,000/bbls over the past week.
Propane production remained over 2M/bpd, with exports checking in at a robust 1.052M/bpd, a very strong number. Also strong was the domestic demand component of the inventory report, which clocked in at 1.321M/bpd.
All in all, the cold weather and exports have certainly helped keep inventories from building during the last few weeks, as propane production is exceedingly strong right now. We are getting into the time of year when production can dip, based on end of year accounting decisions by producers. We’ll see if that number stays strong.
The export arb for American propane remains open, and when American winter demand begins in earnest, we could really see the inventory number begin to dwindle. It was the middle of last December when we really began to see the larger draws. We drew 1.3M/bbls one year ago this week, too. But there were 6M/bbls of draws during the two mid-December inventory reporting periods and then nearly 15M/bbls in January of 2018.
On the whole, the propane inventory outlook does not engender much fear…the markets shouldn’t pop because of anything seen today. The markets are going to move based on what OPEC does or does not do with their ongoing meetings in Vienna. They have cancelled a scheduled press conference for today, as it looks like involved parties have yet to come to a consensus on the size of the production cut and who will bear the larger burdens. Russia will be joining the meeting tomorrow, so that makes sense, as they are now one of the larger players in OPEC+, even though not an official member of OPEC.
The trading markets need to see a cut of at least 1.3M/bpd to be assuaged, or at least, that was the general thinking prior to today’s EIA report. That report showed a 7.3M/bbl crude DRAW…WTI crude had been off over $2/bbl this morning before the report came out, then rallied a bit, but it still flirting with being $2/bbl in the red.
An OPEC production cut of 1.3M to 1.5M/bbls is what the market is expecting..so if that happens, it’s not likely to jolt prices long term…any cut over that would be a bullish signal…anything under that could spell softer times ahead…OPEC does not want the latter. US oil producers do not want the latter. President Trump appears to want the latter.
Speaking of US oil production; the United States has become a net crude, product exporter for the first time in history. ALL HAIL SHALE!
WEATHER: Much of the United States is soon to shift into a more moderate period for temperatures and that should last much of the next week, with another potential flip to normal or below normal anomalies for the eastern half of the nation setting up around December 20th. The research we have been sharing with our clients from our meteorological partners, BAMWx.com, has been cutting edge and against the collective wisdom. BAM has done a fantastic job this year stepping out on their own, backed by the copious research they have been putting together and they have been rewarded with some of the most accurate forecasts in the industry. Here is what their call is for January:
You will note 1,005 GWHDD’s for January, which is 5% colder than the 30-year average…you’ll also note they favor COLDER risks to this forecast. Looking at a map like this is one thing, but BAMWx.com clients get a regular and daily dose of the rationale behind their thinking, as well as much more localized targets, storm outlooks, trends in the data and a complete and comprehensive weather outlook. The good news for clients of The Propane Buzz? You get all of that from BAM, plus all of our energy industry analysis and commentary for as low as $99/month! The value of a BAMWx.com subscription is worth more than that alone.
Subscribers to The Propane Buzz receive two and sometimes three weather related email updates per day (plus propane market commentary and analysis each day), which includes a seven to ten minute extended forecast video from BAMWx.com. This type of intel is invaluable to propane dealers this time of year, and you can subscribe for as little as $99/mo by clicking here. To put it simply, we do weather better than anyone in our industry.
The next four months are the most important period for your business, not just for this year, but for 2018-2019, as some of the key purchasing and supply decisions for NEXT winter will (should) also be made during this time period. If you subscribe to The Propane Buzz, you have hired a partner to help you make the most informed decisions that have a direct impact to your profitability. We help over 100 of your fellow propane retailers with their decisions and we can do the same for you…and we can also help you implement the most cutting edge strategies and tools that are available to you that can have an immediate and positive financial impact to your business. I can tell you exactly where we can save you that money in a five minute phone call. Shoot me an email and we can set up a time for a quick conversation.
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