The EIA’s[1. U.S. Energy Information Administration] weekly propane and heating oil update released on December 16, 2015, reported that US residential propane demand is 1.32 MMbpd (million barrels per day) for the week ended December 11. As of that week, propane demand is 0.22 MMbpd less than the prior weeks’ demand, and also 0.12 MMbpd less than the demand in the corresponding period last year.
US residential propane prices averaged $1.98 per gallon for the week ended December 14, or $0.02 per gallon higher than the prices on December 7, 2015, and $0.40 per gallon, or 16.8%, lower than propane prices in the corresponding period last year.
Propane supply days
As discussed in the first part of the series, lower inventories mean higher demand, but in this case, demand also fell. On the other side, production increased. This is because days of supply were less by 7.6 days.
Because of the decreased days of supply, the total production volume fell, but daily production volume rose. The production levels indicated in the first part of the series were on a daily basis. Due to lower total production volume, inventories fell despite a fall in demand.
Propane prices slightly rose last week despite strong inventory builds. The prices slightly recovered last week because of price corrections. Generally speaking, the mid-winter season prices are high. But prices were quite low due to a supply glut, so they corrected and led to a slight price rise.
A rise in propane demand is bullish for propane prices, as by selling at higher prices, the revenues of propane producers and distributors such as AmeriGas Partners (APU), Ferrellgas Partners (FGP), NGL Energy Partners (NGL), and Suburban Propane (SPH) could rise.
Investors can access the companies above through the AMLP ETF. NGL makes up around 1.0% of the Alerian MLP ETF (AMLP). Find more update on heating oil in the next part of this series.