Some of you have been receiving my emails since May and other have come in somewhere along the way. On August 13th, I sent out an email titled ‘Bulls on Parade’. You can read that at this link, a blog where I repost my emails for later reference….such as this snippet from that email:
“For those of you in the Midwest, barrels are flowing from Conway to Belvieu in a big, big way and that is only going to get worse as more pipelines coming board between the two locations. For those of you on the Dixie, the spread between Belvieu and Hattiesburg could get interesting in a wet barrel situation.”
I found another wet barrel crunch mention in an email from 5/23:
“The trading and financial communities have been shorting propane and they continue to buy the current months and roll their short positions forward. This is creating pent up demand and could lead to wet barrel problems when we get to the mid to latter part of the 4th Quarter, especially if we have grain drying in the Midwest and/or early heating. If those things happened it could get downright challenging in October and November both at the terminal as well as in the markets. Do not discount this factor…even if other factors begin to turn bearish, this will continue to be ‘in the market’ until the shorts are covered. Given the sentiments that prices could ease up next year, it reminds me of the old trading adage; “you never make a bad trade, you just run out of time.” In this instance, they just keep kicking the can down the street, rolling it forward looking to cover later at better economics. Dealers (meaning you) will be competing with traders and the financial institutions for purchases.”
Let’s fast forward to 11/14/2013: Today’s inventory report (which you can read about in greater detail below) was not breathtaking in either direction, however Midwestern inventories are now below 20MM in Conway which is worth noting. Gulf inventories are also below five year averages.
However, the big news of the day nationally is what is taking place in the trading community in Hattiesburg. Remember that wet barrel crunch thing and where I said traders and financial institutions could really play a factor in the fourth quarter as they cover the shorts they had been pushing out all summer and fall?
There were two producers in the market this morning looking to cover barrels….looking for wet barrels…and one of them wound up paying $1.30 in Hattiesburg for barrels when the corresponding cost in Belvieu at the time was $1.1950. That’s a $.1050 spread, or over three cents higher than the shocking $.07125 I told you about yesterday.
Ladies and Gentlemen, we have our wet barrel crunch in Hattiesburg.
The price I emailed out this morning is now $.0350 higher. Those who bought loads deals from me back on Monday and Tuesday are now six cents to the good. I can’t say how long this will last, but this winter has hardly begun and we’re dealing with big time issues like this already, Conway inventories are at spooky levels and the Southern Hills Pipleline comes online January 1st and will send another 50K barrels per day from Conway to Belvieu….whew. DON’T BE SHORT!
Now, here is this week’s inventory report.
Propane inventories experienced a draw for the fourth straight week, dropping by 1.3 million to 60.8 million in the week ending 11/8/13, as reported by the Energy Information Administration. The gap continues to widen from last year’s inventory levels: Current inventory is now 12.4 million below last year’s inventory level at this time and 4 million below the 5-year average of 64.8 million.
Midwest again had the largest draw, dropping 800,000 to 19.8 million. Gulf dropped 500,000 to 33.1 million, East & West were flat at 4.9 million and 3 million respectively.
Historical Averages: Mid-Con is down 7.6 million from this time last year and is down 6.1 million from the 5-year average of 25.9 million. Gulf coast inventory is 4.3 million below last year and 1.6 million below the 5-year average of 31.5 million. East Coast is down 400,000 from last year and is 400,000 below the 5-year average of 5.3 million.
Propane imports were up 5,000 from last week at 152,000 bpd. East Coast was down 4,000 to 50,000; Midwest was up 10,000 to 90,000; Gulf remains flat at zero and West was flat at 12,000. Propane exports remained flat at 249,000 bpd.
Other Inventory Numbers:
Crude Up: 2.6 mm
Motor Gas Down: -0.8 mm
Distillates Down: -0.5 mm