Due to strong exports in April and May, total US inventory on a days of disposition basis is entering the summer months at levels lower than last year. Although the current trends report forecast shows that growth in inventory (specifically in PADD 3) will help the US as a whole return to normal levels prior to the winter, significant risk exists this early in the year to the forecast. Production growth should allow days of disposition to increase at a faster pace than last year during the late summer months. However, if crude prices remain high, naphtha prices in Asia follow and propane gains competitiveness as a chemical feedstock there encouraging US exports. Thus if crude prices remain elevated through the remainder of the year, exports may be higher than currently forecasted in the trend report leading to the possibility of low days of disposition again this winter.
On a PADD level, the industry needs to continue to closely monitor PADD 2 supply/demand dynamics over the next several months. Last month’s trend report highlighted the possibility that weak Conway-Mont Belvieu price spreads may incentivize low motivation to hold inventory in PADD 2. After an additional month of data, it does appear that PADD 2 is holding less inventory and is now at 5 year low levels.