Remember all of those bearish headlines I sent out this morning? Well, the bears have carried the day, as crude oil is having one of it’s worst down days in…
I took some time (just over 20 minutes) to lay out my thoughts and reasons behind them as we all begin to look towards the 2018-2019 supply season, some of the challenges we will face and a lot more. Thank you for taking the time to watch this, and I hope it provides some benefit for you.
Propane inventories experienced a build of 1.2 million to 68.9 million as reported by the Energy Information Administration as of 4/15/16. Total inventory levels are 6.9 million above last year and 19.5 million above the 5-year average of 49.4 million.
Regional Inventories: Midwest up 500,000 to 15.4 million; Gulf up 600,000 to 48.5 million; East flat at 3.2 million; and West up 100,000 1.8 million.
Historical Averages: Midwest is 2 million below last year and 900,000 above the 5-year average of 14.5 million. Gulf Coast inventory is 8.4 million above last year and 17.4 million above the 5-year average of 31.1 million. East Coast is up 900,000 from last year and is up 800,000 from the 5-year average of 2.4 million.
Total propane imports were flat from last week at 76,000 bpd. East Coast flat at 26,000; Midwest up 8,000 to 39,000; Gulf unchanged at zero bpd and West down 8,000 to 11,000. Propane exports were flat from the last 2 weeks at 643,000 bpd.
Additional Inventory Numbers:
Crude Up: +2.1 mm to 1,233.7
Motor Gas Down: -0.1 mm to 239.7
Distillates Down: -3.6 mm to 159.9
Here are the innards of the report:
Production was actually a tad higher this week, while demand was much stronger.
The last for inventory reports in April, from one year ago, saw builds of 2.0M, 2.0M, 2.7M and 1.8M. We saw a 2.8M build last week and a 1.2M build this week, which is right on par from a year ago at 4M through the first two reports of April. We experienced a cold first week in April across much of the country, so that could account for the uptick in demand. The innards snapshot will be worth examining and comparing in the coming weeks.
PROPANE PRICE PREDICTION: OPIS had a report on Tuesday that talked about Citibank’s propane price outlook for the rest of this year. I can’t copy and paste anything from OPIS reports as that is copyrighted material, however I can apply some fair use an share a few things.
Citi is calling for propane at Mt Belvieu to rise to over $.6300 cents per gallon in the fourth quarter of 2016, meaning this year. They also are calling for propane to average over $.7500/cpg in 2017 and in the mid $.8000/cpg range for 2018-2020.
Yesterday’s average close in Mt Belvieu was $.4463/cpg.
I have said repeatedly these past three months that I felt the prices you can lock in for Winter of 16-17 would wind up being cheaper than what the spot markets would get to during the course of the winter. If Citi’s projection turns out to be right, those prices would be substantially higher than what you can lock it in for right now.
I’m not saying Citi is some great sage, but I am taking this opportunity to repeat what I have been saying for the last few months; the upside risk is greater than the downside risk for 16-17.
I will also repeat this; I think getting some pieces of 2017-2018 locked up is also a very good idea, as our numbers for two years out are not much higher than what we have for this year.
As always, thanks for reading and I will email pricing later today.