Strong build season expected while growing exports will limit growth in days of disposition
The EIA weekly estimates of propane stocks have reported builds every week since the week ending March 8, 2019. In 2018 and 2017 strong consistent builds did not begin until the end of April. Going forward the monthly forecast calls for a continued strong build through the first three quarters of 2019 as increased propane production outweighs the effect of expected strong exports. Total stocks are predicted to return to levels seen in 2015 and 2016 before exports started in earnest, upon completion of the slate of the currently existing export terminals. On the other hand, in the fourth quarter, global north winter weather demand will help strengthen exports just after Enterprise’s export terminal expansion comes online (expected in the third quarter) increasing the likelihood for much stronger exports than seen before. The forecast increase in exports will be enough to pull stocks back below end of year 2015 and 2016 levels.
Strong exports, throughout the year, are expected to attenuate the changes in days of disposition over the year relative to the changes seen in stock levels. While total stocks are expected to rapidly rise to the levels seen in 2015 and 2016, days of disposition will not rise to similar levels, given the increased demand pull. The forecast does show a rapid increase in days of disposition above what was seen through 2017 and 2018 as stocks build but, if we do see the forecast increase in exports in the last quarter of the year, that demand will help pull days of disposition back down to the levels seen at the ends of 2017 and 2018. As to pricing, the rapid recovery of days of disposition through the first three quarters of the year suggest a continued depression in propane’s price relative to crude. If exports do increase strongly in the fourth quarter, as expected, and pull availability back down we can expect some upward pressure on propane pricing at the end of the year.