Fasten Your Seatbelts!

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Things are getting bumpier here and abroad. Even propane prices, which were relatively stable, have become more volatile. We’ll try to make sense of it all.

What happened to 102 million barrels of propane inventory?

Looking at the propane inventory chart below reminds me of the steep, 138-foot vertical drop at the Shellraiser roller-coaster in New Jersey which also has a lengthy pause at the very top.

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U.S. propane inventory levels dropped 40 million barrels from November 2023 through January 2024. That’s not a small amount. Part of that was due to an Errata statement issued by the EIA that Midwest inventory levels had been overstated from mid-November through mid-December. But the biggest reason for the surprisingly large drawdown was a jump in product supplied (an indicator of implied demand) in January.

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The February thaw may have everyone thinking of spring, and the inventory drawdowns could definitely be muted for a few weeks. But winter isn’t over.  

Buckle Up

No one can describe the current situation better than Bette Davis did in All About Eve.

There are still “bargains” out there relative to the current market. The biggest discounts are in the May 2024 through April 2025 timeframe, where prices are quite a bit lower.

Weekly Inventory Numbers

U.S. propane inventories showed a substantial draw of 3.67 mmbbls. for the week ending February 9, 2024, exceeding the highest range of industry expectations. This brings national inventory levels to 56.90 mmbbls., about 16 percent behind last year and 1 percent above the 5-year average.

PADD 1 (East Coast) inventories showed a significant draw of 1.64 mmbbls. They stand at 4.89 mmbbls. about 10 percent behind last year.

PADD 2 (Midwest/Conway) inventories had a modest draw of .67 mmbbls. They stand at 14.31 mmbbls., nearly 25 percent behind ‚Äčlast year.

PADD 3 (Gulf Coast/Belvieu) inventories recorded a median draw of 1.24 mmbbls. They stand at 33.21 mmbbls. about 20 percent behind last year.

The Skinny

Propane inventories have dropped over 40% in three months and propane prices have gone up 35% in just two months.

That’s not reason to panic. (After all, for now, there are much lower propane prices on paper in the forward months). But it is reason to buckle up and trust Ray Energy for all of your upcoming propane requirements.

We have the industry knowledge and experience to skillfully guide you through any challenge, and every opportunity, so that we can grow together.

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NOTE: The views and opinions expressed herein are solely those of the author, unless attributed to a third-party source, and do not necessarily reflect the views of Ray Energy Corp, its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any buying decision and it has been provided to you solely for informational purposes.
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