Propane inventories saw a 500,000/bbl build this week, compared to a 600,000/bbl draw one year ago this week. Inventory levels remain in the lower portion of the seven year historical range, as seen in the graph below. Here is the build/draw data for the same time period over the past several years:
2021: +500,000
2020: -600,000
2019: +1,200,000
2018: +600,000
2017: EVEN
2016: +600,000
2015: +1,800,000
So a 500,000 build for this week isn’t a statistical outlier relative to recent times. Let’s take a look at the total inventory build/draws for the last EIA reporting week of March in each listed year compared to the total’s after the following four reports, which puts us close to the end of each April in the year’s shown..or in other words, what happened the four weeks following the final reporting period of March:
2021: +1.8M
2020: -2.26M
2019: +5.7M
2018: +120,000
2017: -1.9M
2016: +7M
2015: +8.5M
So out of the seven years shown, there have been three other years where the start of April inventory build pace has been slower than this year, which are shown in bold above.
All of which is to say that the start of this year’s inventory building time frame feels ‘slow’, it’s in the middle of the pack relative to trajectory among the last seven years. Here are the peak inventory build numbers for the same years listed above:
2021: To Be Determined
2020: 100.84 (10/2/20)
2019: 100.69 (9/11/19)
2018: 84.53 (10/30/18)
2017: 82.18 (9/4/17)
2016: 104.0 (9/25/16)
2015: 106.2 (11/13/15)
Here are the Conway and TET monthly price averages for the years we have been showing, for the month in which the inventory high was reached. For example, for 2020, the inventory high was reached in October, so the number below will show the monthly average in Conway and TET for the month of October, 2020. Conway values are displayed first:
2021: To Be Determined
2020: 52.5 / 52.0
2019: 38.9 / 44.9
2018: 79.2/ 95.6
2017: 84.3 / 88.8
2016: 44.5 / 49.6
2015: 38.8 / 42.2
The years that had the highest propane monthly averages also correlate to the years that had the lowest propane inventory peaks; 2017 & 2018. Those two years were also among the three lowest late April national inventory years as seen in the first set of numbers from above, along with 2020. As we all know, 2020 was a hectic year that saw markets being influenced by unprecedented demand factors relative to COVID-19, so it’s hard to draw anything from last year’s numbers.
When I began embarking on this statistical comparison, my hypothesis was that we should see higher propane values in the fall in 2017 & 2018 than in the other sampled years due to the fundamentals of supply and demand and the psychological impacts of the ‘lower’ inventory levels. For this small data sampling, that came to bear. The 2017 build season started from a point lower than where we are now, while the 2018 build season started from a much higher point, but had the lowest valley to peak inventory build summer of the listed group.
When you factor in the massive export capabilities we have now compared to past years and how export economics are still very favorable for foreign buyers of US propane, the rate of the 2021 build season will be one of the more important factors impacting spot propane prices for this coming home heating season. Adding to this, we have the ongoing and real political drama of the Line 5 situation in Michigan. Should Line 5 be shut down, differential or basis values in the Great Lakes region would likely be forced to the upside, even if hub values at Conway and Mt Belvieu do not.
I realize several of you are making index contract decisions right now and it’s never an easy choice. But these are just some of the factors that you must consider this year as you lay out your supply plan and look to mitigate as many risks as possible from your supply. If Line 5 goes down, the spillover impact into other markets (West to Chicago and East into Pennsylvania and beyond relative to pressure on spot rail rates, not to mention the impacts to Canadian sourced rail values) could carve a wide swath of impact.
It’s always something, isn’t it?