Propane Inventories in Canada at Record High for Oct. 1

The Canada Energy Regulator (CER) reports that underground inventories of specification propane in Canada reached a record high for Oct. 1, 2020, at 2.376 million cubic meters (Mcm), or 14.9 MMbbl. The largest inventory was in western Canada, Alberta and Saskatchewan, which had 1.489 Mcm, or 9.4 MMbl, putting it 44% above the five-year average. Inventories in Ontario were 37% higher than the five-year average at 887,000 cu meters, or 5.6 MMbbl. Inventories in western Canada and Ontario were both considerably higher than inventories reported on Oct. 1, 2019, when underground inventories were at their lowest levels in more than five years. According to CER, these amounts indicate ample supply for the typical winter heating season, which generally spans from October to April.

This year’s propane injection season, April to October, coincided with the COVID-19 pandemic, which resulted in major changes to energy supply and demand in North America and globally. During this period, propane production in Alberta decreased to less than average spring values. Propane exports to major markets such as the U.S. Midwest and Gulf Coast declined significantly, marking a notable reversal in the multiyear trend of export growth. In addition, low propane prices early in the season caused sellers to put propane into storage in the hopes of higher winter 2020/21 prices. This resulted in the largest propane inventory builds (1.981 Mcm, or 12.4 MMbbl) for Canada in recorded history.

Heading into the 2020-2021 heating season, wholesale propane prices at the Edmonton and Sarnia hubs are similar to October 2019. Propane prices in Canada were largely unaffected by the pandemic, as Edmonton prices remained between 44 cents and 47 cents (U.S.) per gallon between March and September; Sarnia prices increased from 50 cents/gal. (U.S.) to 59 cents/gal. in March and September, respectively.

Propane stored at Sarnia arrives primarily by Enbridge Line 5 or rail tank cars, and is then transported to end users in eastern Canada and the U.S. Northeast by rail and truck. Last winter, the propane supply chain in eastern Canada was affected by two notable disruptions. In November 2019, a nationwide CN Rail strike contributed to large price spikes at the Sarnia hub and shortage concerns for end users in eastern Canada. In February 2020, shortage concerns in eastern Canada continued because of rail blockades that forced temporary rationing of propane supplies in eastern Canada.

SOURCE: The Weekly Propane Newsletter, November 25, 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.