US propane up slightly on expected draw

OREANDA-NEWS. US propane markets in the midcontinent and Gulf coast posted moderate gains after the Energy Information Administration (EIA) reported nationwide inventories fell by 1.938mn bl to 69.308mn bl the week ended 23 January.

Market participants on average expected a 2mn bl decline in stocks, according to an Argus survey.

Large declines in inventories are expected during the winter months, as propane is drawn out of storage and used for heating, particularly in the midcontinent and northeast US. But this winter has bucked that trend, as warmer-than-usual weather has seen US inventories climb 65pc above the five-year average, and 119pc above last year's levels.

Spot propane prices at Mont Belvieu, Texas, fell prior to the release of the EIA's inventory data, but prices found support from the report.

LST propane started the session on a downward path, hitting a low of 48.375?/USG, 1.125? weaker than its open. Prices rebounded thereafter, and firmed to 48.625?/USG after the EIA reported PADD III stocks fell by 561,000 bl to 39.120mn bl.

Inventories in that region are 75.7pc above the five year average.

At the EPC terminal, propane surfaced early valued at 49.625?/USG. Prices at the LST terminal fell to 48.5?/USG. Following the EIA's data, prices rebounded to 49?/USG.

At Conway, Kansas, propane gained 1.25?/USG on news that PADD II stocks sank by 1.2mn bl last week to stand at to 22.5mn bl. It last traded at 46.25?/USG.

Propane prices at both hubs are sharply lower versus last January, as market conditions have whipsawed in just a year's time. Last January, Conway propane climbed to a record high of nearly 500?/USG, as a supply shortage and severe cold weather spurred a price shock. This year has yielded the opposite result, much to the chagrin of many propane wholesalers and retailers who purchased additional supply ahead of the winter to better insulate themselves from price volatility.

NGL production in October hit a record of 3.126mn b/d, with propane production totaling 1.035mn bl, according to the EIA. The wealth of supply, coupled with weak demand from a relatively warm winter, has seen Mont Belvieu propane's price fall 67.7pc from last January to an average of 47?/USG, and its value relative to WTI dip to 42pc, down from 61.7pc last year.

At Conway, the difference is more severe, with propane's value declining by 79pc year-over-year to average 43.3?/USG this month, and its value relative to the crude benchmark average 38.3pc, down from 94.2pc last January.

Along the eastern seaboard, stocks climbed by 82,000 bl to 4.766mn bl. Imports into PADD I from other countries totaled 106,000 b/d, up from 50,000 b/d the prior week, reflecting a propane cargo that arrived at the Newington, New Hampshire, port last week.

At the Rocky Mountain and west coast regions, inventories fell by 232,000 bl to 2.96mn bl.

Product supplied to end-users edged lower by 50,000 b/d last week, to stand at 1.614mn b/d. Propylene supplies at bulk terminals rose by 52,000 bl to 4.223mn bl.