Propane inventories drew 1.566M/bbls this past week, putting national inventories at 70.653M/bbls. That’s 2.677M/bbls more than we had at this time last year…and that surplus is likely about to get much wider.
The numbers on the right are from last year. Today’s report can be seen on the left, to the right of the 12/28/18 cell….the YoY gap is the year over year surplus we have right now. Take a look at the Build/Draw column on the right, shaded in gray…you can see that we had some very strong draws for the first three reports of January 2018…this is because it was VERY COLD last year between Christmas and the middle of January.
This year? Not so much.
We’re about to begin to build a significant year over year surplus, and fear over propane fundamentals cannot be found.
The Midwest drew just 300,000/bbls last week and those levels are in line with where they were one year ago. The Gulf drew down 1M/bbls this past week, which puts us 3M/bbls over last year’s levels at this same time. Export demand is stronger this year, relative to last, but propane production was at 2.1M/bpd this past week and we’ve been averaging roughly 100,000/bpd more production this year than last year over the past four weeks.
The global economy is showing signs of weakness. This, from John Kemp of Reuters this morning:
That’s a lot of negative headwinds. On the crude side of things, crude is rallying today, which continues its trajectory since Wednesday. Crude has traded over $49/bbl this morning, possibly due to OPEC cutting production in December, which is in advance of the cuts that were to begin in January.
Crude inventories showed virtually no change from last week. The Saudi’s have been reducing shipments into the United States in recent weeks, which could have something to do with year end accounting aspects, or perhaps the execution of Saudi strategy. This should continue in January and February.
The crude markets bear the most watching right now relative to propane price risks, in my opinion. Propane values have been tied to crude movements most all of 2018, and with propane fundamentals iffy to weak, crude will be the likely catalyst. However, Conway and MTB have lost value relative to crude this week, roughly three to four percent in both markets, with Conway dipping below 50% yesterday. Based on today’s crude movements, at least so far, relative to smaller rises in propane values, respectively, it would seem that both hubs will keep losing ground.