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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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The Most Shocking Chart of 2014

I've talked a lot recently about growing exports of natural gas liquids from the U.S.

This is a space where staggering numbers have been thrown around of late. When it comes to financial metrics for some of the companies involved.

One of the biggest beneficiaries is expected to be shipping companies. Firms that operate gas carrier vessels--the kind that transport commodities like propane and butane to overseas buyers.

In December, I discussed how shipping analysts at DNB Markets saw big gains for shipping prices. Predicting that day rates for gas carriers could rise by over 700% during the next few years.

Now it appears those gains are coming sooner than expected.

The chart below tells the story. Over the last few weeks, day rates for very large gas carriers (VLGCs) have gone through the roof. Rising more than 300% in an incredibly short time.

Day rates for very large gas carriers

Why the sudden leap? Analysts have attributed it a pick up in propane shipments. Following the ultra-cold winter in the U.S.--which saw a lot of propane supply used domestically, for heating.

But it appears that global flows of natural gas liquids are now strengthening. Leading to the shocking run up in VLGC rates shown above.

The incredible thing is, analysts like DNB markets think this could be just the beginning. The group has predicted VLGC rates could rise as high as $300,000/day. Which would be another 200% gain from today's lofty levels.

In short, this is a market that's going through massive change. Creating the potential for huge profits for shipping companies, vessel owners and other players in the space.

There are few commodities seeing these kinds of gains today. Making this one of the most exciting sectors to arise in natural resources for some time. It's also one that few market observers are aware of. Yet.

Here's to a great-looking chart,

By Dave Forest




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Leave a comment
  • Sev on May 06 2014 said:
    I must be missing something when it comes to the 'pick up in propane shipments' argument. While the statement of "Following the ultra-cold winter in the U.S.--which saw a lot of propane supply used domestically, for heating." seems logical on its face, the EIA data simply does not back it up.

    Propane exports peaked mid-December and held at a level of 370 Thousand Barrels per Day right through the mid-March. Since then, US propane exports have dropped down to 314 Thousand Barrels per Day and appear poised to decline further.

    If anything the steep rise in propane exports PRIOR to the harsh winter may have caused the rise in day rates, but that trend has been broken.

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