Propane built just 100,000/bbls for the week ending September 14th, 2018, a number that casts doubt over the industry’s chances of meeting last year’s end of September inventory levels.
You can see from the top line that we are now 6.2M/bbls behind last year’s totals for this time. There are just two-ish reports left before we close the book on September inventory numbers, and September has been the traditional month where propane inventories stop building. That is not always the case, but given how strong the export outlook is for propane over the coming months, it would lead me to believe we are nearing the end for the build cycle this year. Last year’s end of October number was 78.3, which was 300,000/bbls higher than the end of September number of 78M/bbls. We now stand at 74.8M/bbls.
Exports were strong at 975,000/bpd and demand was over 1.1M/bpd. This offset one of the highest weekly production numbers I have seen, which was 2.016M/bpd, an astonishing figure which has to be near the maximum propane production capacity for our industry at the present time.
Propane prices had begun to slide a bit this morning before the report, but they are firming back up based on the data.
ENERGY MARKET CHATTER
IRAN SAYS OPEC PRODUCERS WILL RUN OUT OF OPTIONS TO REPLACE ITS OIL: There are couple of articles that caught my attention this morning, related to OPEC and Iran sanctions. The first one, linked above, carries some significant headline risk. From the item:
“Representatives of the Organization of Petroleum Exporting Countries and its Russia-led allies are set to meet in Algiers on Sunday to discuss responses to incoming U.S. sanctions on Iran oil sales. U.S. President Donald Trump wants to ban all of Iran’s oil exports beginning Nov. 4, bringing the country’s shipments from about 2.3 million barrels a day in June to zero. But a complete shutdown of Iranian oil sales will be impossible to achieve, said Hossein Kazempour, one of Iran’s OPEC representatives. “They cannot push our export to zero,” said Mr. Kazempour, who will be part Iran’s delegation in Algiers. Saudi Arabia has told others within OPEC of its increasing worries that sanctions on Iran will work too well, officials in the cartel say. The Saudis are worried they will come under pressure from Mr. Trump to boost output further and that he will blame them if they fail to keep a lid on oil prices, they said. After the Algiers meeting, “we will go home knowing there is no more capacity,” Mr. Kazempour said.”
Of course, you would expect an Iranian representative to talk like this. However, the Saudi’s have been sending mixed signals to the marketplace, or at least some unnamed sources from Saudi Arabia have been doing so, saying they are comfortable with Brent Crude at $80/bbl. When it hit $80.50 back in the spring, President Trump jumped on twitter to chastise OPEC and imploring them to reign in prices. Brent hit just above $80/bbl last month and are hovering around $79/bbl right now, with WTI crude just below $70/bbl.
This article from the New York Times suggests the sanctions are working.
OPEC+ meets this weekend in Algiers, and the messaging coming out of that gathering will be important. If there is any talk or leaks about concerns related to a shortfall in spare global capacity for supply, prices stand a strong chance of moving higher. In my opinion, the ‘spare capacity’ question is the biggest one facing the crude markets with regards to price impact. Sure, there is the potential for a global economic slowdown due to the ongoing (and escalating) trade war with China and fallout from Emerging Market financial woes. Those are big chips on the table on the opposite side of the risk spectrum…but the trade war underpinnings seem more akin to cooking dinner in a crock pot as opposed to using a microwave, and the OPEC+ meeting and global supply and demand analysis are the microwave option.
Here is a preliminary outlook for the coming winter (December-January-February) for the winter of 2018-2019 from BAMWx.com, our meteorological partner. I spoke with Michael Clark of BAM on Monday, and he feels there are risks for ample troughing in the east this winter…which would support below normal anomalies. AN means Above Normal, EC means Equal Chance for above or below normal and BN means Below Normal. I will host BAMWx.com in early October for a comprehensive and detailed Winter Weather Forecast Webinar, and each of you will be invited to access that content, free of charge. I will provide more details on the exact date before the end of September.