Canadian propane inventories built in April

OREANDA-NEWS. May 19, 2015. Canadian propane inventories grew by 530,114 bl in April to 7.025mn bl, according to the Canadian National Energy Board's (NEB) monthly report.

April's inventory build was the first time Canadian propane reserves grew since November last year when a 99,540 bl build was reported heading into December. Canadian propane reserves are 243pc higher than they held going into May 2014 yet 5.08mn bl less than they were at the beginning of the winter.

The 8.16pc build in propane reserves during April coincided with the start of warmer weather across Canada, softening aggregate propane demand. April temperatures were mixed this year; both Edmonton, Alberta, and Sarnia, Ontario, saw warmer than average weather mid-month before colder weather lowered temperatures at the end of the month, according to AccuWeather.

Canada's underground propane storage should now fill until November, according to historical NEB data from the last five years. Last year inventories grew by 10.9mn bl between April and the storage peak in December.

April's build was smaller year-on-year, roughly one-third the size of the build in reserves reported last year. Smaller inventory numbers were in part because of a draw reported in western Canadian inventories, which fell by 102,791 bl to 4.36mn bl at the beginning of May. This is the first draw reported in western Canadian propane reserves during April since 1995, according to NEB historical data.

Western Canadian propane markets have experienced prolonged oversupply throughout the 2014/2015 winter. Prices have fallen dramatically despite the unseasonable drop in storage reserves. Edmonton propane spot market prices hung between 7.375?/USG and 13.125?/USG in April, supported slightly in the second half of April by a cold spell in the US midcontinent.

Several companies active in the Edmonton NGL market reported starkly lower first-quarter revenues because of the drop in propane prices. Keyera's marketing revenue tumbled 38.5pc year-on-year, while Pembina's overall quarterly earnings dropped by C\\$72mn (\\$60mn) compared to 2014.

Inversely, eastern Canadian reserves grew by 632,904 bl to 2.66mn bl heading into May, and prices at Sarnia were steady, between 52?/USG and 55?/USG.

Canadian spot market trading has been thin since the seasonal pricing switch on 1 April, when Canadian term contracts typically transition to summer pricing clauses.

On 13 May, the US Energy Information Administration (EIA) reported US propane inventories at 68.459mn bl for the second week of May. Although overall US stockpiles rose, inventories in PADD II fell by 355,000 bl as lower regional prices opened an arbitrage between the US midcontinent and Gulf coast markets.

Canadian butane inventories grew by 550,000 bl to 4.08mn bl. NEB Canadian crude oil production estimates predict only a marginal slowdown during the month of May.