Propane Preparedness Month
Is the propane industry ready for winter?
Are you prepared?
To begin, a note that our thoughts and prayers go out to everyone affected by Hurricane Florence, as well as all those affected by the tragic situation in northern Massachusetts.
September Planner.
Our industry has also experienced unpredictable and impactful events, most often due to regional supply interruptions or surges in demand during the winter months. So, I’m proclaiming September as “Propane Preparedness Month” – a time to review supply and demand and make preparations now before we head into winter.
What We Know Now.
The most recent inventory reports show propane supplies trailing 11% behind the five-year average, Cushing OK, crude supplies near the bottom of the five-year range, and natural gas supplies trending below the five-year average.
We aren’t exactly heading into winter overly flush with propane supply or supplies of natural gas and crude oil for that matter, the two “parents” of propane.
Are Propane Prices High Enough to Discourage Exports and Extend the Build Season?
Probably not. The WTI/Brent spread is the widest it’s been since early June, once again approaching $10 bbl., which should boost export demand and dampen the prospects for an extended build season. And the spread is only likely to go wider ($15 bbl.?) in the short term as a result of US refinery turnarounds and looming sanctions against Iran.
What Could Happen?
A major consulting firm for the energy industry recently made large revisions to its winter outlook for propane supply and pricing, mostly in response to record-high propane exports this summer and the slower pace of inventory growth. They concluded with a fall forecast for possible record low days of propane inventory disposition (days of supply) based on the likelihood of continued strong export demand. And, their expectations for winter include the possibility of a higher propane-to-crude ratio.
It’s hard to argue against their conclusions.
What Steps Can I Take Now to Prepare?
Three things:
- Prepare.
Be prepared for unexpected surges in demand (generators, polar vortex) by taking out some winter-only insurance with us. We have additional “wet gallon” propane supply available to purchase, conveniently located at multiple storage sites in both New York and New England. Pricing is available on an index or a fixed price basis for the Oct. thru Mar. period. Call, text or email us now to reserve your share of these “wet gallons” while supplies are available.
- Plan.
By planning and scheduling ahead, you are helping us to serve you better. This request is partly in terms of supply planning, but also, and as importantly, in terms of transportation planning. It’s no secret that the CDL labor shortage affects all of us, from bobtail drivers to transport drivers. Trucking will be tight again this winter. You can help us serve you better by scheduling your orders a week or even a month ahead. After all, we can always modify the schedule.
- Perform.
Thank you for performing on your monthly contract commitments. I know it doesn’t always seem like a big thing, but it allows us to honor and perform on the annual supply commitments we make to the folks that produce propane. In turn, this helps to ensure that we all continue to receive a reliable supply of propane.
What’s Happening with Propane Prices?
EIA Weekly Numbers
US propane inventories for the week ending 9/14/18 were largely unchanged at 74.8 mmbbls. with only a nominal build of .2 mmbbls. and are currently 7.5% behind last year and 26.5% behind 2016.
PADD 2 (Midwest/Conway) inventories built .4 mmbbls. They currently stand at 26.3 mmbbls., nearly unchanged from last year and 10% behind 2016.
PADD 3 (Gulf Coast/Belvieu) inventories decreased by .3 mmbbls. They currently stand at 37.5 mmbbls., roughly 16% behind last year and 38% behind 2016.
The Skinny:
With two major new propane terminals in Hampton, NY, and Grafton, MA, added to our diversified supply and distribution portfolio (rail, pipeline, and marine), Ray Energy is better prepared than ever before to meet your propane requirements and the challenges of the 2018/2019 heating season.
The new propane terminals will also allow transportation companies to become much more efficient this winter – getting the supply you need delivered to you faster – by reducing travel and wait times.
So please help us serve you better by “preparing, planning, and performing.” Winter can be stressful enough in the propane industry, but there’s no need to go into it worried!
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NOTE: The views and opinions expressed herein are solely those of the author, unless attributed to a third-party source, and do not necessarily reflect the views of Ray Energy Corp, its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any buying decision and it has been provided to you solely for informational purposes.
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