US summer propane draw earliest on record

US propane inventories saw their earliest summer draw since the Energy Information Administration (EIA) began keeping records, amid rising export demand.

US propane inventories fell by 774,000 bl, the earliest draw in summer propane stocks since the EIA began tracking them in 2003.

The EIA reported yesterday that US propane stocks stood at 64.48mn bl the week ended 20 June, following a week of 1.1mn b/d in exports given strong demand from Asia.

The largest declines in inventories came from both the East coast and the midcontinent, where a strong 23.875¢/USG north/south arbitrage between Conway, Kansas, and Mont Belvieu, Texas, is encouraging shippers to move supply south.

The last time the US saw a draw reported between the months of June and August was at the end of August 2009, when a reported 1.5mn bl decline in stocks was quickly reversed the following week with a similarly-sized build.

Last summer a spate of two dozen cargo cancellations helped build propane inventories by 23.1mn bl between June and August. This year, US propane inventories have so far built by 17.3mn bl since the start of June.

This summer, strong gains in international paper in Asia are keeping pace with stronger propane prices at Mont Belvieu, Texas. The physical arbitrage for Mont Belvieu propane on a spot fob basis, including terminaling fees, versus the physical price of delivered cargoes in Asia stood at $65/t yesterday.

US propane is well aligned with delivered prices in Asia on the Far East Index; in July the FEI premium to US delivered prices in Asia using spot terminaling fees and spot VLGC freight on a Houston-Chiba basis stands at an average of $0.75/t in July.