US propane prices depressed by record seasonal stocks: Kemp | BOE Report

US propane prices depressed by record seasonal stocks: Kemp | BOE Report

U.S. propane inventories have climbed to a record seasonal level at the start of October as the light petroleum liquids recovered from record gas field production have grown even faster than the brisk increase in exports.

Inventories reached 102 million barrels on Oct. 6, up from 85 million barrels a year earlier, according to data from the U.S. Energy Information Administration (“Weekly petroleum status report”, EIA, Oct. 12).

Stocks were 13 million barrels (+15% or +1.18 standard deviations) above the prior seasonal average for 2015-2022 and just 1 million barrels below the all-time high of 103 million set in November 2015.

Inventories ended winter 2022/23 around 10 million barrels (+22% or +0.98 standard deviations) above the seasonal average and the surplus has continued to swell despite strong exports.

As a result, spot prices at the hub at Mont Belvieu in Texas have fallen to an average of just $29 per barrel in October 2023 (33rd percentile for all months since 1990 after adjusting for inflation).

Real prices have retreated from an average of $37 (51st percentile) in October 2022 and $67 (87th percentile) in October 2021.


The volume of propane recovered from gas wells has grown at a compound rate of more than 9% per year over the last decade.

Field production reached 414 million barrels between January and July 2023, up from 168 million in the same period in 2013.

The propane boom is a by-product of the huge growth in dry gas production which has increased at a compound rate of 5% since 2013.

The industry has invested in field gas processing to recover more of the premium propane to be sold separately.

U.S. petroleum refineries also produced 59 million barrels of propane between January and July 2023, unchanged from the same period in 2013.

But there has been little growth in domestic consumption, with 218 million barrels supplied to domestic users in the first seven months of 2023, little changed from recent years.

Instead, the surplus has been sent abroad, with exports surging to 324 million barrels in the first seven months of 2023 from 54 million in the same period in 2013.

In consequence, the U.S. has become a major propane supplier to East Asia, Latin America and to a lesser extent Europe.

Exports to just four countries – Japan (138 million barrels), Mexico (58 million), China (52 million) and South Korea (42 million) – accounted for more than half of total U.S. propane exports in 2022.

Shipments to the Netherlands (25 million barrels), Singapore (18 million), Indonesia (17 million), Brazil (14 million), Belgium (14 million), Spain (14 million) and Chile (13 million) took the share to more than 80%.


The U.S. propane boom has lowered input costs for petrochemicals producers in Asia as well as providing relatively cheap cooking and heating fuel for households in emerging markets.

But the impact on domestic heating and cooking bills has been much more modest because the price of the wholesale commodity accounts for only about a third to a half of the final retail price; the rest of the retail price is driven by storage, container and transport costs as well as wholesaler and retailer margins.

Despite near-record inventories, U.S. households are currently paying an average of $101 per barrel for delivered propane, which is not far below the long-term inflation-adjusted average of $108.

John Kemp is a Reuters market analyst. The views expressed are his own

(Editing by Marguerita Choy)


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