Record Supply, Low Prices Spur Farmers & Others to Invest
According to the U.S. Energy Information Administration (EIA), domestic propane inventories reached an all time high this month—the highest level on record since the organization first began collecting data more than two decades ago.
Historically, propane and propylene inventories begin to increase in the month of April and continue to grow through the month of September, when demand builds due to both agricultural and heating needs.
However, in light of current record production levels, these inventories began to grow mid-February this year—more than a month and a half ahead of schedule. Indeed, combined inventories of propane and propylene registered at 24.3 million barrels more per month on average for the first six months of the year over the same period in 2014 according to EIA.
Propane Exports Also Grow
As domestic consumption has remained relatively unchanged, this year’s excess supply has led to significant growth in propane exports, in addition to abundant domestic inventories.
EIA reported exports at 636,000 barrels per day (b/d) in April of this year— 222,000 b/d more than the same month last year.
Several projects which included both new export facilities and export terminal expansions contributed the increase, adding 400,000 b/d to waterborne export capacity between April 2014 and April of this year, as reported by EIA. Two additional projects expected to be completed by the end of 2015, will continue to support this trend.
Now is the Right Time to Buy
As would be expected, abundant supplies have led to highly favorable domestic propane prices. In fact average residential propane prices have at times neared $2.29 per gallon this year according to EIA. Compared to a reported high of $4.01 in January of 2014, current prices clearly offer significant savings to buyers.
Farmers using propane for grain drying and other agricultural uses as well as anyone using propane for home heating are urged to evaluate expected propane needs and storage options now, while prices are low. Propane consumption in corn-producing states normally rises in September and October in conjunction with the harvest season, followed by a larger increase related to heating needs in January. As propane inventories begin to fall, prices can be expected to increase. But other pressures will play a role this year as well.
The Window May Be Closing…
According to EIA’s short-term energy outlook report (STEO), stronger than average inventory draws are expected beginning in the fourth quarter of 2015, as a combination of slowing gas plant production—and the continued expansion of exports—begins to take hold.
STEO projects net exports, which achieved a monthly high of 518,000 b/d earlier this year, will continue to increase, topping 702,000 b/d in the fourth quarter of 2016. These projections are based on the expected continued expansion of export facilities as well as decreasing transport costs made possible by a growing number of tankers, as well as completion of the widened Panama Canal.
Assuming projections play out as expected, the resultant, more rapidly declining inventories will put added upward pressure on domestic propane prices, adding further urgency for propane users to purchase and store the gas while prices are still favorable.
Said Brit Medley, President, TransTech Energy, “We’ve already seeing significant growth in agricultural investment in propane storage infrastructure due to the current price levels. In some cases, customers expect to see return on their investment within one season.”
Get Everything You Need to Receive Low Cost Propane at Your Location
TransTech Energy is a leading supplier of new and used ASME propane storage vessels, with one of the largest inventories in the country.
Contact us today at 888-206-4563 to learn about our storage solutions for farms and other remote locations requiring propane for agricultural and heating needs. We offer the same expert advice, quality products, and full service delivery and installation for small and large projects alike.
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