Propane inventory in US sets new record
As the U.S. prepares for another winter, government records show stockpiles of propane have reached record levels. What’s in store for propane markets?
Propane is a hydrocarbon gas liquid used mostly for space heating and as a feedstock for other chemicals like ethylene and propylene, as well as for drying agricultural crops. Natural gas processing plants and petroleum refineries are the two largest sources of propane.
The U.S. Energy Information Administration has collected weekly propane inventory data for 22 years. According to its most recent report, U.S. inventories of propane and propylene reached 97.7 million barrels as of September 11. EIA describes this as the highest level of propane inventory on record.
What explains the buildup of propane in storage? Record high propane inventories are partly due to seasonal dynamics in supply and demand. Demand for propane for heating and agricultural uses is highly seasonal, while demand for propane as a chemical feedstock lacks strong seasonality. Over recent years, propane and propylene stocks are typically drawn down during the winter heating and agricultural drying season (October to March), and then rebuild from early April through September.
This year, EIA data shows inventories began increasing in mid-February. EIA notes that domestic consumption is relatively flat, but found increases in propane production. In particular, EIA’s latest data shows that natural gas processing plants are producing a greater share of propane than in previous years (rising from 62% in 2008 to 76% in 2014), while propane production at refineries has remained relatively constant.