Winter 2019-20 Propane Consumption Slides

During the winter period 2019–2020 (October through March), U.S. propane supplied averaged 648,000 bbld, the lowest level since winter 2016-17, according to EIA’s recently released May Petroleum Supply Monthly. Propane inventories typically build from April to October and then draw down as temperatures begin to drop. In some years, when the corn harvest is delayed or corn grain moisture is too high, an early seasonal spike in demand may occur. Propane demand typically aligns with propane weighted-heating degree days (HDDs), reflecting the large share of consumption for space heating.

According to EIA, in the East Coast, PADD 1 (Petroleum Administration for Defense District 1) propane supplied has been increasing over the past five winter heating seasons, reaching 350,000 bbld for the 2019–20 heating season. This is around 3600 bbld higher than the 2018-19 heating season despite a relatively warmer winter.

NOAA reported 4109 HDDs for the 2019–20 heating season, a total 446 HDDs (-9.7%) less than in the previous winter. This slight increase in propane demand may be a result of an increase in the number of houses that consume propane for space heating as well as growing non-space heating demand for agricultural applications, such as poultry farms.

In the Midwest (PADD 2), on the other hand, total propane consumption declined despite high levels of consumption early in the winter season. PADD 2 propane product supplied decreased to 298,000 b/d this past winter, a 13.9% drop relative to the 2018–19 winter. The decrease in propane product supplied this past winter corresponds with HDDs for the 2019–20 heating season, which was 9.9% lower than the previous heating season.

Propane consumption in PADD 2 in winter 2019–20 began strong, with November product supplied 13.7% higher than in November 2018. The sharp increase in PADD 2 early-winter demand was a result of added propane use by commercial grain dryers—the delayed corn harvest resulted in grain with moisture content significantly higher than average. Increased early-season demand was the result of cooler-than-normal weather in October and November, which had 30% more HDDs than the five-year average.

Both the drying demand and the above-average heating demand ended in December 2019. Excessive snowfall and declining corn prices also put an end to the grain harvest and grain drying activity by about the second week of December 2019; USDA reported just 82.9% of corn crops were harvested across the Corn Belt. NOAA reported December and January HDDs, peak space-heating months, were 3% below the five-year average.

SOURCE: The Weekly Propane Newsletter, June 11, 2020. Weekly Propane Newsletter subscribers receive all the latest posted and spot prices from major terminals and refineries around the U.S. delivered to inboxes every week. Receive a center spread of posted prices with hundreds of postings updated each week, along with market analysis, insightful commentary, and much more not found elsewhere.