February 2020 Inventory Trends Full Report


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The U.S. propane market over the past month can be characterized as having higher overall U.S. inventory levels as compared to the same time last year. These higher inventory levels are the result of lower demand and higher than expected production from natural gas processing.  For example, U.S. production over the past last few months, namely October 2019 through February 2020, has been stronger than expected while demand has been weaker than expected due to milder weather conditions. Propane production from natural gas processing will slow for the balance of 2020 leading to lower inventory levels and days of demand as compared to last year.

Monthly ending inventory levels for the U.S. overall as reported by the EIA for November 2019 fell from the previous month to 95.6 million barrels, approximately 40.7 days of demand. IHS Markit estimates U.S. end of month inventory levels will continue to fall on a monthly basis and reach a minimum for the season in April 2020. The end of April inventory estimate is 64.9 million barrels or 29.3 days of demand. This low point in the inventory cycle is still above the inventory level for the same time last year, but it is important to note the months through year end 2020 will be very different and lower compared to last year.

Month ending inventory levels after May 2020 will be lower year-over-year owing to lower overall supplies, mainly originating from a slowdown in propane production from natural gas processing. See the Stocks and Days tabs in the Propane Monthly Stock Report for the details. Lower total U.S. supplies and an erosion of stocks will partially be offset by lower consumption levels. Propane from natural gas processing is expected to slow while overall supplies decline partially offset by lower domestic demand.

The outlook and forecast for propane exports has also been lowered for the month of February 2020 due to weaker international demand, namely from China. The coronavirus has weakened Chinese demand in the short run and has indirectly impacted U.S. propane waterborne exports. Exports could snap back and increase in the coming months as the coronavirus pandemic subsides and China ramp ups their propane purchases. China is expected to increase their purchases of propane from the U.S. given the unwind of the U.S.-China trade war. As part of the unwind, the U.S. and China entered into a Phase 1 agreement which not only establishes a plan, but also establishes an obligation for China to increase energy and products purchases from the U.S., including propane, over the next two years. The details are being put in place by the Chinese government and incremental purchases of propane from the U.S. could start as early as March 2, 2020. The EIA reported U.S. exports of 1.2 million barrels per day for November 2019 and U.S. exports are expected to rise to around 1.8 million barrels per day by year end 2020.