U.S. Propane Exports Run At Record Summer High

(August 13, 2018) — The National Propane Gas Association (NPGA), citing IHS Markit Waterborne, reports that as Middle East propane exports to Asia fell drastically in June, Asian buyers turned to the U.S. to meet their chemical-demand needs, leading to U.S. exports hitting record highs for the summer months and to a large revision of IHS Markit’s winter inventory outlook.

“Due to record-high summer exports thus far the pace of inventory growth slowed significantly, and it now appears that exports are keeping up with continuously growing record-high gas plant production of propane,” NPGA explains. “The higher exports over the past month led the U.S. to have a non-seasonal stock withdrawal last week.”

Noted is that the propane-to-naphtha spread this summer has led to high utilization by propane dehydrogenation (PDH) plants in Asia. That in turn resulted in much higher Japan-to-Mont Belvieu propane price differentials than those witnessed last summer, incentivizing spot export barrels in June and July.

Further, the forward curve for the Japan-Mont Belvieu propane spread is showing added strength over the winter months. The updated forecast for the fall continues to show record low days of propane inventory disposition.

In the winter months the forecast has been updated to show the effects of lower autumn stock builds owing to record-high exports and IHS Markit’s expectation that new export records will be set.

“Thus, the inventory and days of days of disposition forecast has been updated to show lower levels similar to those witnessed last year,” NPGA reports. “The lower inventory views for the winter also led IHS Markit to increase its view of the propane-to-crude ratio in the winter months to match the large spikes in price similar to those witnessed last year.”

(SOURCE: The Weekly Propane Newsletter, August 13, 2018)