Propane production recovers to near-record levels

The winter storm in January had a big impact on propane production. The drop in production caused more calls on inventories, helping to tighten them up and resulting in some support of prices. It has taken a while for production to recover, and this past week it hit the highest level of 2024. The 2.660-million-barrel-per-day (bpd) rate of production was just 27,000 barrels off the record high set in August of last year.

 

As production has increased over the past few weeks, so have propane inventories.
Chart 1 – U.S. Propane/Propylene Production
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Chart 2 shows how the call on inventory while production was low caused propane inventories to drop from 2023’s high levels back to the five-year average. But with the recovery in production, it appears inventories are headed back toward the trend seen last year.

 

After the storm, refinery throughput fell about 13 percent to its lowest point. Some refineries decided to perform seasonal maintenance after the storm rather than start up only to go back down again in a few weeks for maintenance. That extended the time it has taken refinery throughput to get back to normal. It still hasn’t fully recovered.

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There is a strong correlation between the recovery in propane production and the recovery in refinery throughput. However, there simply isn’t any way that the decline in refinery throughput accounted for all the decline in propane production.
Chart 2 – Total U.S. Propane/Propylene Inventory
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Refineries produce about 10 percent of the U.S. supply of propane. Last year, refineries yielded an average of 278,000 bpd of propane. A 13 percent decline in refinery throughput would only yield a 36,000-bpd decline in propane production. Propane production was off 15 percent at its lowest rate, yielding a 396,000-bpd drop.

 

Refineries also make propylene, and some of that propylene is included in the total propane inventory number reported as 52.164 million barrels for the week ending March 22. And, initially, propylene is included in propane production. But even if we include all the propylene along with the propane produced by refineries, it would only account for 69,000 bpd of the 396,000 bpd of the propane/propylene production drop.
Chart 3 – U.S. Refinery Throughput
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About 90 percent of propane supply comes from natural gas liquids fractionators, so we know that those also had to be running at reduced rates to cause the drop in propane production. Unfortunately, we don’t get any data on fractionator throughput rates. We suspect if we did have the data, the chart would have some semblance to refinery throughput or propane production charts here. Keep reading...
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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.