US propane inventories fell 59 million barrels since October despite a mild winter, largely on record exports, the Energy Information Administration said Friday.
"As domestic propane consumption has remained relatively flat or declined on an annual basis, US exports of propane have continued to increase," EIA said in its Today In Energy feature. "Rising production and lower seasonal heating demand over the past two winters, in particular, have meant that more propane has been available for export."
Stocks began to fall during the week of October 7, 2016, EIA data showed, when inventories were at 103.93 million barrels. As of March 10, the latest data available, stocks had dipped to 44.47 million barrels, or 18.03 million barrels below levels at this time a year ago.
The 59.46 million-barrel draw this season tops last year's winter draw by almost 20 million barrels -- in the same 23-week period -- and is 32 million barrels larger than winter 2014-15.
Because propane's primary source of demand domestically is as a heating fuel for homes and businesses, inventories tend to peak in late September or mid-October and bottom out in March.
An expanded Enterprise LPG export terminal on the Houston Ship Channel, which came online in December 2015 and the startup of Phillips 66's 150,000 b/d Freeport, Texas, export terminal in late 2016, along with a growing shipping fleet, have increased US propane export capacity.
In fact, US propane exports in December 2016 -- the latest monthly export data available -- topped 1 million b/d for the first time since the EIA began reporting propane exports in 1973 at 1.05 million b/d. December 2015 exports were at 751,000 b/d.
As such, Gulf Coast propane prices spiked as high as 74% of crude futures in early February, a first since October 2011. Outright prices for non-LST, or Enterprise, barrels reached a 28-month high of 93.75 cents/gal February 2.
WINTER 2017-18
Next winter's stocks are not likely to rise to the 100 million-barrel levels of the last two years because of the expected startup of Sunoco's 275,000 b/d Mariner East 2 pipeline in the third quarter and continued export demand, according to Platts Analytics Bentek's Weekly NGL Market Monitor.
Mariner East 2 will allow producers in the Utica shale play to move LPG to Marcus Hook for export.
Platts Analytics models show stocks could reach 81 million barrels by the first week of October if inventories build at a similar rate to the average builds in 2015 and 2016 and Mariner East 2 does not come online until next year. If Mariner East 2 starts up quickly before the end of the year and Northeast propane does not reach the Conway, Kansas, or Mont Belvieu, Texas, NGL hubs, stocks might only reach 60 million barrels by October.
"This likely represents a "worst-case" scenario of sustained high exports through the summer and fall," analysts said in the Weekly Monitor. "A minimum-price response would be the 5-15 cents/gallon needed to re-route propane from Marcus Hook to the US Gulf Coast."
