Given the state of natural gas liquids (NGL) markets, it should come as no surprise that U.S. propane inventories (including propylene stocks) hit a record high at the end of September while the average weekly spot price at Mont Belvieu, TX, hit a low not seen since the third quarter of 2009, according to the Energy Information Administration (EIA).
At the end of September inventories stood at 75.6 million bbl and rose by almost 22% between July and September, according to EIA data.
“While seasonal increases are not unusual because of reduced demand resulting from warmer weather, the steady climb in inventory levels this year is more likely the result of increased production,” EIA said. “Propane supply in the United States averaged 1.24 million b/d for the third quarter, 13.4% more than third quarter average demand.”
Third quarter average weekly supply was 5.3% above second quarter levels, despite an 8% quarter-on-quarter drop in the average weekly Mont Belvieu spot price, EIA said.
The good news for producers is that the United States is now a net exporter of propane, with exports expected to grow with the development of new infrastructure. This year from January through July, the United States exported an average of 0.16 million b/d, while importing an average of 0.13 million b/d.
“The United States has not been a net exporter of propane and propylene since the EIA and U.S. Bureau of the Census trade data series began in 1973,” EIA said.
Propane supplies have been growing along with supplies of other NGLs, particularly ethane, on the strength of production from rich gas plays such as the Eagle Ford Shale in South Texas and the wet portions of the Marcellus Shale in Appalachia, EIA noted.
“The Gulf Coast region…accounted for 60%, or 7.4 million bbl, of the 12.4 million bbl rise in third quarter propane inventories, placing downward pressure on Mont Belvieu spot prices,” EIA said.
The abundant supply of ethane and propane has driven down prices, and lumpiness in the development of new petrochemical infrastructure on the demand side has caused a number of analysts to predict that NGLs will continue to have a rough ride in the months to come (see Daily GPI, Oct. 17; Sept. 28).
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