US propane demand for corn drying delayed

  • Market: LPG
  • 10/04/19

Crop-drying demand for US propane is expected to come later than usual this season as spring flooding led to delayed midcontinent harvests.

Expected corn production for grain in the 18 major corn-growing states is expected to be 4pc lower than last year, at 13.8mn bushels, according to the US Department of Agriculture's (USDA) August crop production outlook. In Iowa, the largest producer of corn, 90pc is at the dented stage or beyond — 17 days behind 2018 and two weeks behind the five-year average — while only 2pc has been harvested, 11 days behind the average, according to the latest USDA data.

Despite the harvest delay and what has traditionally been an increase in demand for propane for crop drying, midcontinent propane stocks are lower than normal this year. Stocks were 27.5mn bl for the week ended 27 September, according to the US Energy Information Administration (EIA), down by 272,000 bl from last year.

The lower stocks are due to strong southbound demand for propane into the export markets on the US Gulf coast, coupled with additional Atlantic coast exports when the 250,000 b/d Mariner East 2X NGL pipeline comes online this quarter.

That increased pull for export helped give Conway, Kansas, propane an average 6¢/USG discount relative to Mont Belvieu, Texas, in September — a far narrower north-south arbitrage than in September 2018, when Conway stood at a 28.27¢/USG discount to the Gulf coast.

Overall, US propane stocks are up by 27.8pc from year-ago levels given steady production of more than 2mn b/d, according to the EIA, leading to lower prices relative to last year. US stocks are expected to build well into October, despite pockets of cold weather seen in the northwestern US.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

LPG carriers return to Panama as limits ease


02/20/24
News
02/20/24

LPG carriers return to Panama as limits ease

London, 20 February (Argus) — VLGCs returned to the Panama Canal in December-January after steady rainfall allowed canal authority ACP to increase daily transits, lowering Neopanamax auction slot prices, although many ships embarked on longer voyages via the Suez Canal and Cape of Good Hope. VLGCs moved 2.2mn t of LPG through the Panama Canal in January, up by 7.8pc from December and 36pc from November, despite total VLGC exports of LPG falling by 3.5pc on the month to 7.7mn t in January, oil analytics firm Kpler data show. ACP increased daily transits to 24 from 22 on 16 January after steady rainfall in November allowed it to reverse a plan to cut transits to 20 in January and 18 in February. The operator also released more auction slots in December at 180, compared with 154 in November, falling to 167 in January. The average Neopanamax auction slot price fell by 82pc on the month to $243,900 in January, compared with $2.15mn in November and a record high of $3.9mn for one slot on 8 November. Demand eased as more VLGCs rerouted to the Suez Canal and around the Cape of Good Hope after ACP in late October announced tightening transits over winter. But transits through the Suez Canal fell by 83pc on the month to 92,000t in January, and from 1.02mn t in November, after attacks on commercial ships in the Red Sea forced vessels to head around the Cape or back to the Panama Canal. The increase in Panama transits has boosted VLGC availability and pressured freight rates in January, although they have since crept back up, and the canal is still a long way from its typical 32 transits a day. VLGC monthly export volumes by route Neopanamax auction prices Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Morocco prepares to cut its retail butane subsidies


02/20/24
News
02/20/24

Morocco prepares to cut its retail butane subsidies

The government wants to bring down the cost of subsidising cylinder use even as butane demand continues to rise, writes Efcharis Sgourou London, 20 February (Argus) — Morocco's government is moving ahead with plans to phase out direct butane subsidies to reduce its budgetary allocation. Its intention to gradually reduce retail LPG price controls could in theory pressure domestic sales, although Rabat plans to replace the blanket measure with more targeted cash subsidies for low-income users, potentially softening the blow. Retail butane prices in the country — Morocco consumes mainly butane for residential use, with more than 2.6mn t/yr of demand — for a 12kg cylinder have stood at 40 dirhams ($4) since the 1990s under the government's subsidy programme. This price will rise by Dh10 in April, another Dh10 from 2025 and another Dh10 from 2026 to reach Dh70. These prices equate to $331/t now, rising to $413/t in April, $496/t by 2025 and $578/t by 2026. The government's reform does not indicate any further increase in the price cap beyond 2026, but if it grew at the same rate the subsidy would effectively be scrapped by 2030. The cost of the subsidies to the government have fluctuated over the years depending on the price of butane imports to Morocco and the level of domestic demand. The cost of a 12kg cylinder increased to Dh90 in 2012 before declining to Dh37 by 2016, and then fluctuating moderately over the next five years, according to the finance ministry. But it surged to a new high of Dh94 in 2022, representing more than 70pc of the total cost of the product sold. The cost of a 12kg cylinder fell to around Dh68 in the first three quarters of 2023, meaning the government spent around Dh5,666/t, or $560/t, on LPG subsidies. Based on residential demand, this equates to a total subsidy bill for LPG of about $1.1bn. The hope for the government is that LPG prices do not climb significantly above current levels, allowing them to trim this bill by more than 40pc over the next two years. Moroccan prime minister Aziz Akhannouch said in October the government would reduce subsidies for LPG by Dh3bn to Dh16.4bn this year. Akhannouch is a billionaire businessman and chief executive of conglomerate Akwa Group, the owner of Afriquia Gaz, one the country's main LPG importers and distributors. The subsidy reforms are designed to be targeted by diverting some of the subsidies that presently benefit the commercial sector and more affluent consumers to low-income households through cash transfers — similarly to the Indian government's PMUY scheme. Rabat plans to allocate Dh25bn this year in financial aid to families affected by the devastating earthquake in the country on 8 September 2023. This will also be used to help soften the blow of rising LPG prices for low-income households, although the government has not provided details on how much of the budget will be used for LPG prices. Formula change? The decision to phase out subsidies was largely anticipated by European and Moroccan market participants, but they are uncertain how the move will impact Morocco's LPG import price formula for tenders and spot purchases. The formula was updated at the start of this year to 70pc US Gulf coast export prices plus freight, and 30pc northwest Europe and Mediterranean coaster prices plus freight, from the previous 50:50 split. Parliamentary talks on removing energy subsidies have gained momentum since 2017 when the country was spending around $1.2bn/yr on them and when Mediterranean butane coaster prices averaged $505.50/t fob Lavera. But waning support for the government that eventually lost the 2021 general election stalled the move, while butane coaster prices rose to $788/t fob Lavera in 2022 and Morocco's energy subsidy spend exceeded $3bn. The country's new pro-business government is now in a better position to implement the measure. Morocco LPG imports by origin 2023 US, NWE butane prices + freight to Morocco Morocco LPG subsidy per 12kg cylinder Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

UK faces winter LPG supply crunch


02/20/24
News
02/20/24

UK faces winter LPG supply crunch

Domestic supply vulnerability could be alleviated by a number of new infrastructure projects, writes Waldemar Jaszczyk London, 20 February (Argus) — A long-term decline in the UK's refinery supply of LPG has exposed the domestic industry's vulnerability again this winter during peak heating demand. But the recent launch of several infrastructure projects may bring the market some respite. UK refineries provided the majority of domestic LPG supply historically, but this has been steadily declining since the early 2010s owing to a combination of under-investment, underperformance and closures. Production sank to 1.5mn t in 2023, from the peak of 2.9mn t in 2011, according to government data. Since late 2021, availability has been further squeezed by high natural gas prices, which encouraged upstream producers to leave natural gas liquids (NGL) in the gas stream and refineries to burn LPG directly as a fuel. Gas processing plants (GPP), the market's second supply source, trimmed LPG output by over 20pc during the past three years to just under 1.6mn t last year, Argus data show. While the recent return of natural gas prices to below LPG has improved supply, old problems came to the fore, keeping supply tight this winter. Regional refineries have been caught up in a backlog of maintenance after two years of maximising runs to capture strong diesel margins. The age of the facilities has not helped, as most are 50-60 years old, leading to frequent breakdowns. At some sites, it is no better than a 50:50 chance if they have product available at any given time, an LPG distributor says. Severe storms in the North Sea have also caused delays in offshore activity, according to market participants. Scotland has proved a major supply challenge for the industry, as the region relies heavily on deliveries from the Mossmorran NGL plant, which faced problems for much of December and January because of upstream infrastructure issues, according to an industry executive. During the previous winter, precarious supply was offset by declining demand as the combination of the cost-of-living crisis and mild weather pushed consumers to use less LPG. This season, temperatures remained broadly above average, but affordability became less of a factor as prices eased. Delayed autumn buying, together with a significant cold snap in January, resulted in demand surging, with some companies reporting near 10pc year-on-year increases. The squeeze has put significant pressure on the UK's limited storage capacity, particularly in the west as most LPG storage facilities are concentrated at Immingham in the northeast and Canvey Island in the southeast. This creates logistical challenges when refinery outages in the west occur or when demand spikes. New gas flows While the industry has not sat idle in the face of these challenges, long-term investments to improve supply security have only begun to bear fruit. UK LPG retailer Flogas' Teesside project was initiated in 2022 to supply an additional 120,000 t/yr by redirecting previously-exported LPG from a GPP at Seal Sands. The product flow started just a few weeks ago, but is already helping to supply north England and Scotland this winter, Flogas Britain managing director Ivan Trevor says. Similarly, Flogas' conversion of a defunct LNG storage facility in Avonmouth, Bristol, to a 34,500t LPG storage facility started operating in June, but only a modest volume has been received into its storage tanks this winter, the firm says. Avonmouth will be connected via a 6km pipeline to Bristol, transforming it into an import facility capable of receiving vessels up to 20,000t. This will address the UK's increasing dependence on seaborne supply. Flogas was granted planning permission for the pipeline in 2022 but the launch has been delayed to 2026-27. The project will probably reach a throughput of 200,000-250,000 t/yr, and with more road racks, there is "no reason why we could not double that", Trevor says. It might need to as the decline in existing supply sources is unlikely to be reversed. UK LPG imports UK LPG production UK LPG demand by sector Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

India to be major oil demand growth driver by 2030: IEA


02/09/24
News
02/09/24

India to be major oil demand growth driver by 2030: IEA

Mumbai, 9 February (Argus) — India will become the largest source of global oil demand growth between now and 2030 as industrial expansion boosts transport fuel use, the Paris-based IEA said this week. "The massive industrial expansion means that diesel/gasoil is the single largest source of oil demand growth, accounting for almost half of the rise in the nation's demand and more than one-sixth of total global oil demand growth through to 2030," the agency's India Oil Market Outlook report said. The IEA forecast India's gasoil demand to grow by 540,000 b/d over the seven-year period, at an annual average growth rate of 4.5pc, mostly driven by increasing use of commercial transportation trucks. It said this will account for about one-third of non-OECD gasoil growth and will be more than the net worldwide rise for gasoil demand as OECD use declines. Annual growth in Indian gasoline demand is forecast to be just 0.7pc, because of an increase in electric vehicle use and biofuels uptake, even though the agency projected a more than 40pc growth in the size of India's car fleet by 2030. Energy supply security The IEA also said India will become more reliant on crude imports, and "increased attention is needed on its security of supply." "India needs to enhance its capacity to respond to possible oil supply disruptions by implementing and strengthening its strategic petroleum reserve (SPR) programmes and improving oil industry readiness," the agency said without elaborating on the possible disruptions. The IEA estimated India's crude stocks at 243mn bl, around 66 days of net import cover, of which 26mn bl are in the SPR. India is planning to lease out around 1mn t of vacant strategic crude storage capacity to domestic and international companies, India Strategic Petroleum Reserves' (ISPRL) managing director L.R. Jain said at India Energy Week (IEW) this week. The IEA said a structural shortfall in LPG supplies is likely to increased the need for imports, although India maintains higher export potential for light and middle distillates. India's is targeting an increase in refining capacity to 450mn t/yr (9.04 mn b/d) by 2030 from around 254mn t/yr (5.1mn b/d) presently, prime minister Narendra Modi said at IEW this week. He said India's primary energy demand is likely to double by 2045. India is a net importer of crude, bringing in more 80pc of its needs, and is a major consumer and a net exporter of oil products. By Sathya Narayanan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.