The Gasoline Pump Barometer
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Critically Tight Global Oil Supplies
I don’t think there are many industry experts who could honestly say they’re certain of the future direction for crude oil or propane prices right now. Mixed messages and polar-opposite market signals have become a daily event.
Before the Iran situation, it seemed likely that the U.S. would have abundant domestic propane inventories, maybe even a containment problem before winter. And in their Short-Term Energy Outlook, the EIA reported that they expect propane stocks to peak around 112 million barrels in October. That would be a new record.
The flip side of this, in terms of pricing influence, comes from the International Energy Agency. Last week they wrote that global oil supplies may stay critically tight for a while longer in what they’re calling “an unprecedented supply shock,” even if the situation in Iran is resolved soon.
Which means the U.S. should see strong export demand continue for crude, LNG and LPG. The question is: can robust domestic production of natural gas liquids outpace strong export demand?
That remains to be seen. The weekly inventory reports for propane have been wobbling between draws and builds!
The Gasoline Price Barometer
It’s hard to make sense of all the geopolitical uncertainty. But there’s little doubt in your customers’ minds where propane prices should be going.
Most of your customers expect retail propane prices to be higher now given what’s happening at the gasoline pumps. That’s their price barometer.
The Skinny
The U.S. will likely start the heating season with above-average propane stock levels. Maybe even record levels. But much of that will depend on whether robust natural gas liquids production can outpace strong export demand.
It’s no secret that there’s lots of uncertainty in energy markets now, but there’s little doubt in the minds of your customers which way the retail price of propane should be going.
Your customers expect higher propane prices because they’re paying more at the gasoline pumps. That’s their price direction barometer. And if the price of gasoline were to drop precipitously, they’d expect propane prices to soften.
Thank you for your business!
