Northeast US braces for propane imports

OREANDA-NEWS. January 27, 2016. At least two handy-sized cargoes of propane will arrive from northwest Europe into the US East coast in early February, despite less expensive domestic prices and high inventories.

US Padd 1 inventories stood at 6.02mn bl the week ended 15 January, 50.6pc above the five-year average, as a boom in production from the Marcellus shale, coupled with unseasonably mild weather, left the region oversupplied.

"December was warm and people still have lots of inventory on hand," according to an observer. In the eastern Canadian hub at Sarnia, the closest pricing location to the northeastern US, posted prices for propane fell from 56?/USG on 7 December to as low as 44?/USG by 21 January alongside weaker sentiment in the US.

However, term contracts into the US East coast from Europe could push prices lower in February.

The US imported on average 178,000 b/d of propane in January and February of 2014, according to EIA data, with an average of 92,000 b/d going to the East coast. During January and February of the following year, the US imported only 145,000 b/d on average, with an average 70,000 b/d sent to Padd 1.

So far in January of 2016, the US is importing the equivalent of 133,000 b/d of propane, with two additional cargoes from Europe scheduled to arrive on the East coast in early February as part of a term contract.

While last week's winter storm across the northeastern US marked the first significant surge in heating-related demand seen this year, observers say mild weather so far this heating season has left ample inventories in the region.

The term deliveries from Europe continue even as US propane production in the northeast hit an all-time high of 115,000 b/d in September 2015. Retailers note that imports from the Newington, New Hampshire, terminal, which is located further east than the Teppco pipeline that provides much of the heating fuel in the area, are in some instances easier to move out in bulk, especially when it's necessary to load dozens of trucks quickly. At the same time, Jones Act regulations prevent a non-US-flagged ship from moving between US ports, and so shipments come from Europe, as opposed to the nearby export facility at Marcus Hook.