National propane inventories stand at 86.5M/bbls after a 1.4M/bbl draw this past week. Inventories are now 22.7M/bbls above where they were one year ago this week and appear headed towards the highest home heating season ending inventory level on record.
One year ago this week, inventories drew down 3.7M/bbls. But we have been experiencing very warm temperatures across much of the eastern two-thirds of the United States. Our friends at shared this morning that December 2019-January 2020 may go down as the warmest Dec-Jan combined months relative to Gas Weighted Heating Degree Days since 1952 (see image on the right, click to expand).
The winter of 2016-2017 was the ‘Winter that Wasn’t’, a very warm winter with below normal home heating consumption for propane demand. Yet the industry still drew down a record 64.3M/bbls of inventories from peak to valley that year because of very strong export demand.
This season’s inventory level peaked at 100.8M/bbls back on October 4th, per the weekly EIA reports. This was the third-highest inventory level in history. Given that inventories now sit at 86.5M/bbls, it means we have drawn down just 14.3M/bbls of inventory in the last three and a half months!
I know I wrote some about this last week, but I certainly think it bears repeating as this is going to be one of the biggest factors impacting what you will pay for propane for next winter and beyond; propane’s inventory fundamentals have rarely been more bearish. We appear headed for an end of January inventory level north of 80M/bbls nationally. The highest end of January inventory level on record was set in January of 2016, at 78.1M/bbls. The next highest was 67.2M/bbls at the end of January 2015.
2015 and 2016 are distinct because those were the two years where propane inventories reached their highest and second highest levels on record, respectively; 104.1M/bbls in November of 2015 and 104M/bbls in September of 2016.
Also, propane values in January of 2016, for future winters, were as low as the industry had seen in over a decade. Crude oil prices were also languishing below $30/bbl at that time, too.
WTI crude oil took a big plunge yesterday, closing at $56.74/bbl and they are trading below $55.50/bbl as of this writing. These are the lowest WTI levels since December 3rd, and there are concerns globally that WTI could trend lower based on waning demand for crude products and China’s decision to shut in a major metropolitan area over a health scare.
Past performance is not indicative of future results and there are risks associated with fixing prices on propane futures, either with fixed priced contracts of financial instruments such as swaps.
However, propane retailers should be on high alert and evaluating winters of 2020-2021 and 2012-2022 propane values. That is not advice to pull the trigger today, but beginning to chart values, where they have been and where they are heading (if you have not already begun this process already) would be a good idea so that you can apply greater context to where things go in the coming weeks and months, which can provide greater clarity to your decision making process.
If you have questions on any of this or want to have a deeper conversation, email me at and we can set up a time to talk.