OREANDA-NEWS. Canadian propane prices are poised to fall in the first quarter of 2016 as seasonal heating demand ends, leaving the already oversupplied region with an inventory glut.

The oversupply is most acutely felt in western Canada, where gas processing and oil sands production, coupled with weak prices in the rest of the energy complex since the end of 2014, spurred many producers to curb output or shut in wells earlier this year. As a result, December propane inventories in Canada stood at 8.5mn bl, down 29.28pc from year-ago levels. Prices this December thus far averaged a 21?/USG discount to prices at Conway, Kansas, up from last year, when they averaged a 30.6?/USG discount, in spite of a milder winter.

Still, prices are poised to remain weak well into 2016, as a lack of available takeaway infrastructure to the Ferndale, Washington, export terminal on the West coast, coupled with a dearth of demand from the US, leaves barrels stranded in western Canada. During the weak summertime months this year, Edmonton propane prices fell into negative territory, trading as low as -9.5?/USG 8 June, as producers paid for parties to store the material. Participants said it could happen again unless exports increase.

Recent grassroots opposition to a Portland, Oregon, propane export terminal, and a "no" vote by the commissioners at the Port of Longview in Washington for another NGL export terminal have echoed broader sentiment against fossil fuel infrastructure investment in the northwest. Canada's only export terminal, in Ferndale, currently ships two VLGCs per month to markets in Japan and Korea, but is limited to only one extra VLGC every two months due to rail constraints from Edmonton, as there is no pipeline from that region. For perspective, the expansion of the Enterprise export terminal in Houston can load a single VLGC in 16 hours.

In the face of local opposition, emerging markets and greater domestic chemical demand are viewed as the best option for the supply overhang. Until the pathways are cleared and new plants come online, though, one market participant suggested "keep it in the ground."