How much propane storage exists in the United States? Will we run out of room for it? I’ve been asked thsee question a few times in recent weeks as we are well beyond all time inventory records for this time of the year with months of builds in the offing.
A representative of our company recently saw a presentation which researched the volume of propane storage capacity that currently exists in the country. Below is the breakout in million barrels of storage capacity along with the latest inventory levels:
Zone Capacity Current % Full
————— ——— ——– ——-
East / Padd 1 8.5 5.0 58.8%
Midcon/ Padd 2 29.0 21.6 74.5%
Gulf / Padd 3 96.0 51.2 53.3%
West/ Padd 4 3.9 2.9 74.4%
————— ——— ——– ——-
US Total 137.4 80.7 58.7%
While there is still ample storage capacity remaining in the Gulf, there is scuttlbut pertianing to brine issues at a key facility. To whit, some heavy rains a while back created some brine issues which caused some barrels to see a heavy discount to the ‘regular’ market in Belvieu, some three to four cents in late May.
If the above numbers are an accurate reflection of propane storage capacities at the given pads, I would be most ‘worried’ about Pad 2, which is considered Conway (although other locales are factored into this). The actual storage capacity in Conway and Bushton, the largest feeders for Midwestern supply, have to be very near capacity or at the least will get to that point this summer. Were it not for the product being able to flow south out Conway to the Gulf, we would have already seen white flags emanating from Kansas as in ‘NO MAS PROPANE!!’.
A big question will be how much product continues to come at Conway from Western Canada and other areas and then how much of that product can flow south to the Gulf? If the Gulf begins to back up for whatever reason, Conway propane will have to be discounted even further for the econs to work for it to ship to the Gulf.
When you consider the relative bearish outlook for Crude Oil, factor in the uber bearishness in propane, I just believe we will see additional pullback in propane prices before the summer is over, barring unforeseen geopolitical chaos that you can never truly factor into your pricing structure.
If you have the ability to lock in more supply via an index, which allows you to fix the price at a later date yet ‘reserves your seat on the bus’, that might be the way to go. At least you’re on the bus. Just make sure you’re lifting loads this summer to earn allocation for the winter…because if it’s a ‘good winter’, ample supplies at the storage hubs don’t mean squat, but a relationship with a trusted supplier means everything.