Propane Inventory Levels Are Low
September 10, 2021
The China National Food and Strategic Reserve Administration said it intends to auction off crude oil from its strategic oil reserve at several different times in the near future. This is the first time every China has taken this action. The SPR in China is estimated to be 220 million barrels of crude oil and some energy experts say the release should only be 10 to 15 million barrels each time. China refines about 15 million BPD of oil. China releasing crude oil to lower prices may work in the short term but not in the longer term due to demand growing and tighter supplies. Also, China may have already released the crude oil to their refineries, given their lack of transparency, so the market may not be affected by it much at all. The price movement down may be short live given some bullish indications from EIA. So far today this short-lived price direction is true as yesterday’s selloff is over as the market it up this morning.
The trading ranges for RBOB, ULSD, and WTI crude have been very tight over the last 12 trading sessions. RBOB is a bit wider as the rollover from September to October futures had a roughly 17 cents spread. But again, this market is stuck with no trend and no conviction, so it trades in a tight range.
Oil production is still struggling to return after Hurricane Ida. The Bureau of Safety and Environmental Enforcement reported yesterday that the US is still at its slowest pace of recovery after a hurricane in the Gulf of Mexico ever. There is still 78.48% of Gulf oil shut-in.
The EIA reported the US crude oil production in the week ending September 3 fell by 1.5 million BPD to 10 million BPD, the lowest levels since February.
Total propane inventories are low, Midwest and Gulf Coast stocks are low. The current level has not been seen in roughly ten years. Total stocks sit at 70.099 million and last year at this time there were 97.380 million barrels. That amounts to being short about 45 days of production. There are basically four weeks left in the traditional build season. The market would like to get close to 90 to 100 million barrels but 80 million could be considered on the very low end of “normal”. To get to that low-end number of 80 from 70 the market needs 2.5 million barrel builds in the next four weeks. This seems unlikely with what has been the trend. Now the market can continue to build stocks after September and the market can always have something crazy happen, but the current propane situation doesn’t look great, and you can act now to get full and avoid challenges later.