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MARKET INSIGHTS FROM |
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THIS WEEK'S TOPIC: PROPANE DEMAND |
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Propane demand continues at record high |
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Throughout the second half of last year and into 2024, demand for U.S. propane has been at record highs.
The dark blue line in Chart 1 shows the combination of U.S. domestic demand and exports very strong in 2023, and the lighter blue line shows demand remains strong this year. Year-over-year growth is the pattern, but the increase between 2022 and 2023 was significant. |
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The 2022-23 above-average gain can be attributed to the crude output curbs put in place by OPEC+. Decreased crude production means decreased associated natural gas production and decreased natural gas liquids (NGL) production. That decrease in production, and U.S. propane being a relatively cheap Btu, caused exceptional growth in propane exports. |
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Propane exports can vary significantly week to week, so in Chart 2, we have added trendlines for the five-year average (green) and last year (blue) to make it easier to see the substantial growth. The red line illustrates the pattern of strong export growth that has not slowed in 2024.
If you go back to Chart 1, note how overall propane demand started 2023 very weak. When you add the strong exports in 2024 to the impacts of the winter storm in January, you see the foundation for the massive drawdown in propane inventories that has been occurring. |
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Propane inventories have gone from setting five-year highs at the end of April last year through the first week of this year to now sitting at the five-year average. Such a drawdown in inventories supports prices. But as eye-popping as the drawdown in inventories has been, it has only returned the inventory position to normal.
It has not been just the demand-side increases that have contributed to the recent drawdown in inventories. |
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The January winter storm had a dramatic impact on U.S. propane production. And while production has rebounded from the storm, it has not fully recovered. The result is continued calls on inventory during this winter. Keep reading... |
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ABOUT OUR PARTNER |
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Cost Management Solutions LLC (CMS) is a firm dedicated to the unbiased analysis of the energy markets for the propane industry. Mark Rachal, Director of Research and Publications at CMS, regularly provides insightful looks into various facets of the marketplace. |
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