‘Growing Concern’ might be an oxymoron here, because there are growing concerns with propane inventories due to their lack of growing..or rather, their rate of growth.
Today’s EIA report for the week ending 8/3/18 showed just 100,000/bbls of total inventory build for the past week. This keeps us in a year over year deficit of roughly 1.3M/bbls, but the pace we are on right now is cause for concern.
Over the past four weeks, we have built just 700,000/bbls per week of inventory. That’s a very low number. One year ago for that same period we built 1.35M/bbls per week, including a week with no build or draw, which happened to be one year ago this week. Conway actually drew 100,000/bbls this past week.
US inventories peaked last year at roughly 80M/bbls at the end of September, 2017. We have nine more EIA reporting weeks this year to get us through the end of September 2018. We need to average 1.51M/bbls per week to hit last year’s levels.
Exports are much stronger this summer (since the beginning of June) than last summer; we have seen exports 20% stronger this summer than last…with the trading arb open and Asian markets needing to refill their stockpiles in advance of the coming Northern Hemisphere winter, there are still some strong demand side factors to play out the rest of this summer and into fall. All of this despite propane production being roughly five percent higher over the past four weeks than during the same period one year ago.
Yesterday’s closing average in Mt Belvieu of $.9793 is the highest daily closing average at MTB since the first week of January. Propane has been rising at a higher percentage of crude oil in recent days than has been the case for much of the summer.
There have been dips this summer. This is a chart of daily average propane prices at MTB and Conway, and the outmonths have typically followed suit. The area’s below the thicker red lines constitute the cost averaging opportunities that have been there for you:
But as you can see, propane prices are now near or past the peaks we have seen earlier this summer and spring. I have been keeping track of the forward curve on a daily basis since I launched Propane Buzz back on June 4th, and yesterday’s end of day values of $.9800 4Q18 MTB and $.86583 4Q18 Conway are the highest these time spots have been since at least that point in time.
When you take into account some growing inventory concerns, the strength of propane prices out the curve, especially in MTB and the risk of Conway rising to meet MTB as opposed to the opposite, it’s very, very hard to stare this all in the face and sit on the sidelines if you still have winter contracting needs. I write that without a dog in the fight, as I do not wholesale propane any more and that’s not what puts food on my table.
As I wrote to subscribers early this morning, those of you looking for another ‘dip’ in propane prices for 4th quarter and even 1st quarter 2019 are going to need to see the markets pull back quite a bit to get to levels you likely purchased before.
Crude oil is off considerably at this point in time on the day, and propane values in MTB are off slightly from yesterday’s close but slightly stronger in Conway. As I wrote earlier, propane is not necessarily following crude over the past few days; it’s showing more strength.
WINTER WEATHER: I have been sharing these updates with my subscribers on a daily basis; there are some very positive signs out there pursuant to what this winter could look like. Most of the season computer modeling at this time is showing a colder than normal eastern half of the United States for the forthcoming December, January and February. BAMWx.com, our meteorological partner and whose information is available on a daily basis to Propane Buzz subscribers, is honing in on some pretty exciting analogs.
They also shared this image on twitter two days ago that is a projection using the European Monthlies modeling for Dec-Jan-Feb:
WeatherBell just released their preliminary Dec-Jan-Feb forecast for their subscribers and it looks just like this…then again, their winter forecasts have looked very much like this for each of the past five years, so do with that what you will.
Some of you know this, but I am a weather nerd…and I write about weather quite a bit. For most of you reading this, winter weather has the biggest impact on your profitability, which is why I spend so much time writing and talking about it…and my commentaries and BAMWx.com’s focus on winter weather patterns will only increase as we get closer and closer to October.
Today would be a great day for some of you to try out our risk-free trial to Propane Buzz. You will have access to all of our content for the next seven days, which means you can go back and read what I have been writing on potential winter weather outlooks, as well as what we will be publishing in the coming week. Click on this link to sign up today, and keep in mind we do not ask you for any payment information; just your name, the name of your company affiliation, phone number and a verifiable email address. That’s it.
I want to thank those of you who have jumped on board with a subscription to the Propane Buzz; the support has surpassed my expectations. For those of you that have gone the free trial route, thanks for taking a look. We’re seeing a 70% trial to subscriber conversion rate, which I take as positive affirmation for what we are doing.
August is going to be a great month for The Propane Buzz, as we will have some exciting announcements along the way. I’d love to have you along for the ride if you have not already jumped on board. CLICK HERE FOR THE RISK FREE TRIAL
Thanks for reading!
(if you missed today’s video breakdown of the EIA Report, watch it below)