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US Propane Inventories and Prices Rise in Week Ended September 4

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Nov. 20 2020, Updated 11:59 a.m. ET

US propane inventories

In the week ended September 4, US propane inventories rose 0.2 MMbbls (million barrels) to 96.6 MMbbls. These levels are 20.5 MMbbls greater, or 27% higher, than they were in the corresponding period last year.

Gulf Coast and West Coast inventories both increased 0.2 MMbbls, and East Coast inventories increased 0.7 MMbbls. Midwest inventories decreased 0.9 MMbbls in the week ended September 4.

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US propane production

US propane production decreased from 1.635 MMbpd (million barrels per day) in the week ended August 28 to ~1.572 MMbpd in the week ended September 4. These levels are 1.75% higher than the production levels in the corresponding week last year.

US propane demand

Propane demand for the week ended September 4 increased to 1.164 MMbpd from 1.117 MMbpd in the week ended August 28. However, these levels are ~14% lower than they were a year ago.

Lower demand is bearish for propane distributors such as Ferrellgas Partners (FGP), Suburban Propane Partners (SPH), AmeriGas Partners (APU), and NGL Energy Partners (NGL).

NGL makes up 2% of the Alerian MLP ETF (AMLP). SPH, APU, and NGL make up ~3.5% of the First Trust North American Energy Infrastructure ETF (EMLP).

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What this means

Propane production is outstripping demand by a considerable margin. This explains the steady build in propane inventories. But inventories are well above the five-year average, as we can see in the above chart. If this trend continues, households will enjoy lower prices next winter, thanks to abundant supplies.

Prices are already low compared to last year at Mont Belvieu, Texas, a major pricing hub. Wholesale spot prices as of September 10 were $0.45 per gallon. Compared to September 10, 2014, when prices were $1.071 per gallon, prices are down ~58%. Compared to last week, however, prices rose ~2%.

Background on propane

Propane is a natural gas liquid (or NGL). NGLs are hydrocarbons in the same family of molecules as natural gas and crude oil. US households use propane as a heating and cooking fuel. It’s also an important feedstock for petrochemical plants.

For the latest updates on the energy sector, you can follow Market Realist’s Energy and Power page.

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