See Spot Run

Uploaded Image: /uploads/blog-photos/Dalmation-Running-Alamy-A6JDPW-1200w.jpgThe US has near-record levels of propane inventory. So why is the spot market strong?

National Supply versus Regional Demand

We see examples of this all the time:

Record natural gas production in Texas and Louisiana, but shortages (and electric black-outs) in the Northeast and Pacific Northwest due to strong, local demand.

Or near-record propane inventory levels in Mt. Belvieu, TX, but a premium for spot propane supply in downstream markets.

It’s all about where the supply is when it’s needed most.

Price movement (up or down), availability, and interest in spot supply is based more on regional supply and demand economics than on what’s happening in Houston.

For most of this summer, regional inventory levels and local demand has been largely in balance so we haven’t seen many instances of surplus or distressed supply. Is the Philly refinery shut-down having an impact? Increased Mariner East 2 demand?

Whatever the reason, we’ve seen the scales tilt towards greater interest in spot purchases recently. Consequently, price offers on the regional level for extra propane supply have commanded a premium over term pricing.

And this surprising spot price trend is continuing into September.

What's Happening with Propane Prices?

Propane Price Chart

Uploaded Image: /uploads/blog-photos/RE-FEB2019-Newsletter-Price-Chart_219.-900wjpg

EIA Weekly Numbers

Total US propane inventories showed a larger than expected build of 2.931 mmbbls. for the week ending 9/13/19. That brings national inventory levels (excluding non-fuel use propylene) to 96.52 mmbbls., about 35 percent higher than last year at this time and about 16 percent above the five-year average.

PADD 2 (Midwest/Conway) inventories showed a build of .852 mmbbls. They currently stand at 27.829 mmbbls., or about 6 percent above last year’s level.

PADD 3 (Gulf Coast/Belvieu) inventories rose by 1.23 mmbbls. They currently stand at 55.689 mmbbls. (excluding non-fuel use propylene), roughly 55 percent higher than last year.

The Skinny

The price and availability of spot propane supply is more often based on regional supply and demand economics than on what’s happening in Houston, TX.

So please let us know as early as possible whenever you need extra propane supply to meet unexpected increases in your demand. Ray Energy will be there for you!

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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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