LP Gas, April 2017
IN THE KNOW SUPPLY AND DEMAND A partnership with Propane Resources Q A What has the 2016 17 winter heating season taught us about propane supply and demand dynamics Last winter taught us something we already knew The market understands the changes made in the propane distribution system to move new natural gas liquid production to new export and petrochemical facilities Fractionators and pipelines have been built pipelines have been rerouted pipelines are now carrying different products export facilities have been built for propane and butane ethane and petrochemical facilities have been expanded to use more ethane and propane Not many years ago Dow Chemicals CEO announced its joint venture petrochemical plant in the Middle East and proclaimed there will never be another petrochemical plant built in the United States Yet today the U S is the worlds largest producer of propane and ethane Propane tank car facilities have been Marty Lerum built and expanded across the U S to replace propane pipeline capacity that has disappeared and to take advantage of netbacks to producers that are above export prices The market doesnt understand yet how this new propane distribution system will react to regional demand surges and how high prices need to go in order to balance that demand Last winter the market got an understanding of the new normal inventory levels needed in Mont Belvieu Texas to handle increased propane export demands The market found out how the new export traders can affect U S prices when world propane prices and export capacity line up in tandem The graph above shows how propane prices moved up 40 cents per gallon due to export demands at a time when retail propane demands were anemic That really was quite amazing as the market didnt believe it could happen The market doesnt know how quickly the Midwest and Conway area can rebalance with higher than expected demands We have seen no early winters or heavy crop drying demand since the U S propane distribution system has been retooled for exporting When heavy demand does hit the Midwest the market will err on the conservative side Because we are dealing with an unknown companies that have propane inventory will want to hold onto those volumes until they see they dont need it or the price is high enough they will sell it and take the profit Those that dont have the inventory will need to bid up propane prices in order to get it Mt Belvieu Conway Propane Dec 16 Jan 17 Feb 17 Mar 17 Nov 16 Source propaneprice com Propane Price Movement 095 085 075 065 055 045 The market didnt expect propane prices to gain 40 cents per gallon when retail demands were anemic We learned this winter that higher propane exports could pull up propane prices by 40 cents per gallon Dont be surprised to see the same thing happen in the Midwest and Conway market the first time demand begins to outstrip supply LPG Marty Lerum is managing partner of Propane Resources He can be reached at marty@ propaneresources com or by calling 913 262 8531 SERIOUS STUFF BUILT REAL TOUGH Use the Renaldo RTC420 motorized tank dolly and stop wrestling 420 s before a serious injury occurs One tank dolly delivers peace of mind power flexibility safety efficiency and of course tanks full tanks Visit www renaldo org or call 800 424 5564 Renaldo Sales Service Inc North Collins NY Manufactured and Distributed in the USA www LPGasmagazine com April 2017 LPGas 15
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