Propane inventories drew 1.9M/bbls for the week ending January 4th. That’s a decent draw, but when you consider we had a 6.3M/bbl draw one year ago this week, the year over year inventory surplus has now ballooned to over 7M/bbls…and it will likely grow to over 10M/bbls in the coming two weeks.
Propane production remains near record highs and roughly 200,000/bpd higher than last year at this time, while exports are roughly 100,000/bpd higher at this time from one year ago, both looking at the four-week average. Domestic demand is also roughly 100,000/bpd lower than the four-week average from one year ago, so this is how we get to the lower build levels.
The warmer than normal weather has not helped matters and the warmth will continue to show up in the domestic demand numbers the next two reports..which is going to lead to a continued increase in the year over year surplus. The columns on the right are last year’s numbers, with the columns on the left being this year:
It’s hard to find any propane specific bullish factors right now…the last few days, crude has risen while propane has dropped…that’s stopped for today, as propane is higher along with crude pushing back north of $50/bbl WTI…and the export-cutting talk from the Saudi’s earlier this week, along with optimistic signs between the US and China over trade tariff negotiations has given an uplift to crude market sentiments.
The Saudi’s have set forth a new budget this year, increasing spending by 7%. This has pushed their breakeven budget number north of $94/bbl of crude, according to industry estimates.
They most certainly want to see Brent numbers continue to rise from where they are now, which is about $60/bbl/
But without this crude uplift, we’d likely see propane continue it’s slide as there is nothing in the fundamentals to support it, and the technicals are not supportive, either.
You can see the chart on the left, something I shared earlier this year, with regards to OPEC+ nations and their fiscal breakeven points on Brent crude.
PROPANE BUZZ PODCAST
I have wanted to start a propane related podcast for a few years now…doing this with my previous employer was not an option, and I wanted to grow The Propane Buzz in 2018 and see what played out before launching this. With the move to bring Chris Cox into the company, this is the right time.
Chris is a good friend, and also a propane industry expert. He joins us with vast experience in managing retail supply chain logistics, he was head of NGL’s rail logistics division and was promoted to head up all of NGL’s supply, back in mid-2018. I am thrilled to have him as a member of my team and he will help to bring more value to you and your business via what we will be doing here at The Propane Buzz.
Here is a link to the latest podcast, where Chris and I tackle this question in this week’s podcast, the first in a series of Things to Contemplate for 2019: Should you ever take a physical supply long position again? Should you even contract at 100% of expected fixed-priced needs?
We discuss this and more in this edition of the Propane Buzzcast, the first propane-related podcast for the propane industry. If you listen to podcasts on your smart phone, you can search ‘The Propane Buzzcast’ in your podcast listening app, and subscribe.
If you’ve yet to listen to podcasts on your smart phone, iPhones have a podcast app installed automatically. Android users can download various podcast apps via the Google Play store, such as ‘Podcast Addict’, free of charge.
If you wish to listen via your smartphone, and perhaps send the audio through your vehicle speakers via bluetooth, the links below will take you right to the podcast pages where you can listen and subscribe:
Maximize your time while driving to your next appointment!