Lower exports in September and October reduce the risk of critical days of disposition this winter
US exports fell in September and October after experiencing record highs during the summer. This allowed inventory to grow in PADD 3 as the weakened spread between naphtha and propane lowered the incentive for PDH units to operate at high utilization rates in Asia. In November, the sharp drop in crude prices allow Asian PDH margins to recover and exports to Asia increase. In spite of the higher exports in November, the drop in export in September and October allowed inventory and days of disposition to recover and thus has lowered the risk of reaching critical days of disposition in early 2019. PADD 3 inventory saw continued strong growth due primarily to high levels of associated gas plant production due to record high crude and gas production. However, the higher exports overcame the growth in production and inventory fell.
The sharp rise in PADD 3 inventory in September and October lowered the likelihood of a critical days of disposition situation in early 2019. However, extremely cold weather or a sharp increase in exports could quickly revive the risk of low days of disposition in PADD 3. Although PADD 1 inventory appears to be at near record high inventory levels entering the cooler months of the winter, higher exports from the Mariner East terminal could lead to stronger draws than previous years. PADD 2 inventory remains near 5 year average levels and would require very cold weather to draw down to critical levels.