US exporting propane in large quantities

Propane markets throughout the summer have been interesting, even if price has been relatively steady the past three months. Propane has been slow to follow crude oil prices as crude reacts to concerns over U.S. and European economics, job reports, higher world demand, and the hurricane season.

These issues likely will guide all commodity prices to some degree, but let’s focus on propane.

Natural gas and propane suppliers spent the summer building inventories in preparation for the winter heating season, and while natural gas stocks are in good shape this year, propane builds continue to lag.

U.S. inventories of propane are more than 11 percent below the five-year average and 14 percent below last year’s levels. Good news is that mid-continent inventories are off only 2 percent from the five-year average.

The bulk of the shortage, not surprisingly, is on the Gulf Coast, where inventories are 20 percent below last year’s level. U.S. exports have been leaving the Gulf in record amounts and are projected to continue.

In June 2011, propane exports nearly doubled from June 2010 levels. The U.S. has moved from a net importer to an exporter in a very short period of time.

Why are we exporting? With a cheap dollar, our propane looks like a bargain to other countries.

The U.S. continues to find more natural gas, therefore propane, in shale plays, making exporting propane more viable. The U.S. pipeline system, capable of moving propane and other natural gas liquids around the country, even though dated, is far superior to other countries’ infrastructure.
 
Look for exports to continue unless we see a stronger dollar, and with the current economic outlook, government support for a higher dollar is doubtful. The chart shows how fast exports have risen in the past year.

You likely know that grain drying will be light again this year with the summer heat the Midwest experienced. Winter demand is unknown, as forecasts for both a warm winter and a cold winter can be found if you look in the right places.

An early cold snap with U.S. inventories at low levels likely will give propane prices a boost, and without an economic collapse, prices appear steady to higher.

If you still haven’t made plans for propane this winter, now is a good time to take the worry out of this decision and visit your local FS member cooperative for its contracting and even-payment programs.
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Randy Miller is GROWMARK’s director of propane operations. His e-mail address is rmiller@growmark.com.