US Gulf propane nears 3-year low on high inventories

23 May 2012 16:46  [Source: ICIS news]

HOUSTON (ICIS)--US Gulf propane marked its lowest spot trade since mid-August 2009, as a result of propane from the midwest and Canada moving to the Gulf coast because the mid-continent storage hub is nearly full, said a consultant on Wednesday.

“Inventory in the in the mid-continent at the end of March was 12-14m bbl more than average,” said president of Petral Consulting Company Dan Lippe.

“[Natural gas liquids (NGL)] marketers and distribution system people began to take this problem seriously in April – apparently, they decided to load as much propane into rail cars as possible and move them to the Gulf coast.”

President Anne Keller of Midstream Energy Group said pipelines from the mid-continent are full, and any excess propane from what can be moved to the US Gulf is backing up in the midwest Conway NGL hub in Kansas.

“[There] is an unexpected increase in inter-regional transfers of propane into the Gulf coast – and no place other than storage for the additional volumes to go,” said Lippe.

This has placed pressure on prices on the Gulf coast and midwest.

At the Mont Belvieu storage hub in Texas, propane traded at a low of 90.50 cents/gal on Tuesday, the lowest price since a trade of 90 cents/gal in mid-August 2009. At the Conway hub, propane traded at 65 cents/gal on Tuesday morning.

If monthly increases to NGL storage at Conway continue at historical averages, Lippe said NGL inventory will exceed storage capacity by July or August.

Excess propane from Canada, which usually ships south to Conway, is bypassing mid-continent storage and moving to Mont Belvieu in Texas, adding further inventory, said Lippe.

Canada exports two-thirds of its propane to the US,” Keller said.

In addition, Keller said there is no more capacity to ship propane offshore until terminal expansions are completed later this year.

Propane inventories for the US are at 54.0m bbl for the week ended 18 May, the US Energy Information Administration (EIA) reported. This is up 71% from the same time last year, when inventories were 31.6m bbl.

Mid-continent inventories were at 21.0m bbl, up from 14.0m bbl this time last year. In the Gulf coast, inventories measured 26.9m bbl, compared with 13.6m bbl last year, according to the EIA.

By: Sheena Martin
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