Robust propane demand limiting inventory build
September 14, 2021 By Mark Rachal
Propane retailers must go into their peak demand period assuming they will continue to see strong competition for the available supply.
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Propane retailers must go into their peak demand period assuming they will continue to see strong competition for the available supply.
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This week, Mark Rachal, director of research and publications, explains why a small shift in propane price strength is worth noting.
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Propane’s price may get to the point of curbing the demand from PDH units, but most analysts don’t think that is happening anytime soon.
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Mark Rachal, director of research and publications for Cost Management Solutions, addresses the fundamental drivers of propane inventory levels.
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Propane prices are mostly influenced by crude’s price, not natural gas’s price. But the vast majority of propane supply comes from natural gas processing.
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The relatively light build for the week ending July 9 marked the fifth week in a row of inventory building at a below-average pace.
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Propane production needs to stabilize or grow to change the pricing environment so propane prices fall again, says Mark Rachal of Cost Management Solutions.
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Not only does EIA data show propane inventory near five-year lows, but prices at Mont Belvieu topped the $1-a-gallon mark for the first time since 2018.
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The price change was the largest within-season increase in residential propane prices since the 2013-14 season.
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Retailers that evaluate market conditions and establish buying criteria based on that evaluation may find that they captured the lowest price of the year.
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