January 2020 Inventory Trends Full Report


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The EIA reported actual U.S. propane inventory of 101.4 million barrels for the month of October 2019 (45 days of demand) and the outlook for total propane inventory is further declines through April 2020.  The April 2020 inventory level is currently project to approach 60 million barrels, in line with 2019 inventory levels.  The outlook for propane supply, demand, imports, and exports for full year 2020 has been revised to reflect slower production growth resulting from slower U.S. upstream activity as a reaction to lower U.S. natural gas prices and lower global crude oil prices. The refinery runs for 2020 on a monthly basis were adjusted downward for full year 2020 as well. The outlook and forecast for propane production for 2020 on an average monthly basis has been reduced by approximately 160,000 barrels per day (b/d) as compared to last month’s forecast. Most of the propane production reductions were made in PADD 1 and PADD 3. Propane exports have been adjusted downward reflecting lower propane availability. The reductions in exports are commensurate with the reductions in production from gas processing.

Correspondingly, days of demand or days of forward supply for the same period were decreased by approximately seven. U.S. average days of demand for calendar year 2020 on a monthly basis is expected to be around 32 days with a maximum of 41 days in September 2020 and a minimum of 26 days in April 2020. The U.S. upstream industry has been challenged financially and a slowdown in activity and production rates will likely persist.

U.S. onshore upstream spending for 2020 will be limited to around $85 billion, a reduction of nearly 15% compared to 2019 spending levels. For the next two years, upstream producers outside of the Permian basin will continue to be financially challenged given the outlook for oil and natural gas prices. The outlook for West Texas Intermediate (WTI) spot Cushing oil prices are $57 per barrel ($/bbl) and $51/bbl for 2020 and 2021 average annual basis, respectively. U.S. natural gas prices are expected to average $1.96 per MMBtu ($/MMBtu) and $2.34/MMBtu for 2020 and 2021.

Since the last monthly report, total weekly demand reflected by product supplied has outstripped supplies but logistical constraints at U.S. export terminals have kept inventory levels in check. Over the past month weekly inventory levels have hovered around 88 to 86 million barrels. It is important to note the total demand for the month of January has also been lower than expected and lower as compared to the same time last year. The logistical export terminal issues were the result of heavy fog along the U.S. Gulf Coast delaying ship arrivals and departures. Weekly U.S. propane market observations are consistent and aligned with our monthly estimates and forecasts.

The January monthly forecast and outlook for U.S. propane fundamentals and inventory levels have been modified. The “Change from Previous Forecast” section in SummaryJanuary2020 workbook for the U.S. highlights and denotes this month’s forecast changes (in the U.S. mthly rpt tab).