US propane stocks up 1.9mn bl, Midcon down

OREANDA-NEWS. May 14, 2015. US propane inventories rose by 1.943mn bl last week to stand at 68.459mn bl, while midcontinent stocks took an unexpected drop, the first draw in May for that region since 2010.

Total US propane stocks are now twice the volume held in reserve at the same time last year and 48pc higher than the five-year average, according to US Energy Information Administration (EIA) data.

US propane inventories in PADD II drew by 355,000 bl the week ended 8 May, the first midcontinent reduction to take place in May since 2010. The unseasonal draw in PADD II inventories occurred in part because large volumes of inter-hub transfers between the midcontinent and PADD III on the Gulf coast, market participants told Argus. PADD II to PADD III transfers have been on the rise in recent weeks as the Conway/Mont Belvieu propane spread widened to 6-8?/USG, allowing for a viable arbitrage between the two hubs.

Yesterday, the market estimated a 2mn bl build on average in Argus' weekly survey — very close to the reported figure — but many participants were nonetheless surprised by the draw reported in PADD II.

Midcontinent storage facilities with rail access have been inundated with propane-by-rail deliveries for the last several weeks, and demand for rail access is on the rise. Williams Partner's Conway, Kansas, rail yard is already completely scheduled for the summer months.

Conway propane spot market prices were choppy after the EIA's data release. The market quickly traded up to 45?/USG, dipped to 43.625?/USG and bounced back up to stand at 44.75?/USG.

The overall inventory build was largely driven by a 2.314mn bl increase in Gulf coast stocks, which rose to 44.695mn bl. Participants explained the build as evidence of softer petrochemical feedstock demand for propane and subdued exports during the last week.

Spot Mont Belvieu, Texas, propane prices weakened on the release of the EIA data but activity was thin.

LST propane jumped to 52?/USG, from 51.75?/USG, upon the report's release, then tumbled to 50.5?/USG.

EPC propane surfaced after the release of the EIA data at 51.25?/USG.

In PADDs IV and V, in the Rocky mountain and west coast regions, propane stocks fell by 98,000 bl to 2.382mn bl.

The draw in PADD IV and V reserves may have been caused by the loading of an export cargo at Ferndale, Washington, last week, participants told Argus.

A week earlier, PADD IV and PADD V reported a large 672,000 bl build in reserves.

Propylene at bulk terminals across the US rose by 192,000 bl, and product supplied to end-users rose by 157,000 b/d.