US propane traders reevaluating 4Q supply

OREANDA-NEWS. April 13, 2015. Mont Belvieu, Texas propane market participants are looking beyond the current supply glut to possible fourth quarter shortages.

The potential strength of propane export capacity that has come with recent terminal expansions has some worried that a healthy cushion of stocks could be eroded quickly and lead to shortfalls when domestic demand picks up in the fall. US propane inventory levels stand at 57.959mn bl, 30.375mn bl above where stockpiles were during the first week ending April of last year. But the 446,000 bl draw in PADD III stockpiles reported by the Energy Information Administration (EIA) this week, mostly for export, is seen as a reason for concern.

Enterprise Products Partners announced completion of a planned expansion at its LPG export terminal earlier in the week, allowing the terminal to move 9mn bl/month of fully refrigerated low-ethane content propane. A final upgrade is due during the fourth quarter to bring the export terminal's total capacity to 16mn bl/month.

In the second half of this year, Dow's Freeport, Texas, propane dehydrogenation (PDH) unit will come online, which is estimated to consume about 30,000 b/d of propane.

During the same time the expansion project and the PDH plant come online, the propane market will be heading into its peak demand season as crop drying and colder temperatures begin to pull at the propane supply.

Market observers have said that if the next crop drying and winter season is strong, the propane market could see another shortage as seen two seasons ago because stronger exports and the PDH plant will be accounting for a glut of the propane volumes.

The majority of propane traders have said propane values will likely hover around values seen at the beginning of April, averaging 52.35?/USG, for the coming low demand months.

While higher demand for the fourth quarter is expected to put a squeeze on supplies, the premium for fourth quarter delivered propane has actually softened so far in April. Fourth quarter propane prices averaged a 4.28?/USG premium relative to the average March price for propane traded in the Mont Belvieu LST terminal. So far in April that premium has dipped to average 3.97?/USG.