Hello folks…sorry for the delay between emails. It’s been a busy week in the Ohio Valley and in Indiana!
COLD: Here is a link to another winter forecast from a meteorologist from Raleigh, NC.
Scroll down to page 21 for the layman’s takeaway and maps. December is the toughest month to peg right now…a cold winter is ahead, but it’s a matter of when that cold hits that will tell the tale. If it settles in early in December, lookout. However, the regions of the country that are most likely to experience below normal cold temps all winter long are the East and Southeast. I also think the Ohio Valley will be in this target, too.
For those of you reading this who reside in the Southeast, you’re also under the gun for above average precip….both of those things should sound familiar, as I began emailing you about this likelihood back in March, given typical El Nino weather signatures in your area. The ‘bonus’ with what will be a weak El Nino is that the jet will not be in a normal west to east pattern and ridging will likely occur, allowing for more (frequency) and colder Arctic intrusions than you have during mild to strong El Nino years.
Even though inventory levels are ample (although we did see a 1.7MMBB draw this week), it’s the old problem of ‘can you get what you need, where you need it, when you need it?’. That’s the propane industry right now…the answer is typically ‘no’ or ‘not quite’ which will lead to logistical price spikes on the Dixie pipeline. It will also lead to hyper-local price spikes in the Midwest, too…namely around Chicago and the gas plants of the Midwest.
So despite ample national inventories, don’t breathe easy that we won’t see spikes….I think market values have a chance to get back to where folks have locked in contracts, which isn’t a bad thing.
CRUDE: The entire energy complex has been hitched to crude the last month and I don’t see that changing all that much. The market uptick this week has been demand driven, with a little bit of a crude bounce back figured in. Values for crude dipped below $80 for in day trading earlier this week but has not settled below that mark just yet.
CROPS: There is still a LOT of corn drying that needs to happen in the Midwest…especially in Iowa & Ohio. Indiana MIGHT be 50% of the way there and Illinois is just over that mark. The soybean harvest is coming nearer to an end and November is going to be a big corn dryer month. I recently spoke with one large corn drying client in Ohio who has told me their October 2014 has been significantly stronger than their October 2013….I also think the second half of grain drying will be more challenging than the first half, because there will be a more concerted effort across the board and less moving to beans. Things could get a bit sticky in November, but so far the temps in the Midwest look above average.
Here is this week’s inventory report:
Propane inventories saw the first draw of the winter season, dropping by 1.3 million to 80.3 million in the week of 10/24/14, as reported by the Energy Information Administration. Current inventory is 15.5 million above 2013’s inventory level at this time and 11.5 million above the 5-year average of 68.8 million.
Regional Inventories Dropped: Midwest down 400,000 to 27.5 million; Gulf down 700,000 to 43 million; East down 200,000 to 6.2 million; and West flat at 3.6 million.
Historical Averages: Mid-Con is 4.8 million above last year’s inventory level and is up 1.2 million from the 5-year average of 26.3 million. Gulf Coast inventory is 9 million above last year and 9.4 million above the 5-year average of 33.6 million. East Coast is up 1.1 million from last year and is 500,000 above the 5-year average of 5.7 million.
Propane imports were up 58,000 bpd to 123,000 bpd. East Coast was down 3,000 to 19,000; Midwest was up 63,000 to 92,000; Gulf remains flat at zero and West was down 2,000 to 12,000. Propane exports were down 26,000 to 392,000 bpd.
Other Inventory Numbers:
Crude Up: +2.1 mm
Motor Gas Down: -1.2 mm
Distillates Down: -5.3 mm