Written on: October 12, 2022
EIA inventory data released Wednesday showed a build for propane which brought U.S. levels to 84.4mmbbls, up from 82.8mmbbls last week and 72.3mmbbls a year ago. With inventory numbers stronger, Mt. Belvieu and Conway were both trading around 85 to 86 cpg on Wednesday, down several cents from Monday as crude oil futures also retreated for three straight days on concerns about demand, the strength of the dollar and the likelihood of further interest rate hikes.
Normal temperatures are expected across much of the U.S. with only a section of the eastern U.S. possibly experiencing some lower than normal temperatures in the next couple of weeks. OPEC and the EIA have lowered their outlooks for demand on concerns about stricter China COVID-19 containment and high inflation.
Anger remains strong over the OPEC-plus decision last week to cut crude oil supplies by 2mmbbls per day. Some analysts believe crude oil prices could spike back up to $125 a barrel amid Russia’s response to a US-led price cap plan which would tighten the global market even further. Russia may cut its oil output further if G7 nations follow through with the plan.
Weather both in the United States and Europe will play a large role in demand for natural gas and propane. With strong export capacity, a large amount of propane can exit the U.S. very quickly as we have seen in recent years when 50mmbbls of U.S. propane have been depleted in a couple of months leaving supplies very low as the winter heating season came to a close. Cold weather and strong exports would bring both supply and price challenges as the season progresses.