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Dave Forest

Dave Forest

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

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This Petroleum Indicator Hits a 20-Year Low

There are some massive changes afoot in U.S. petroleum markets.

Including some unusual trends many investors have never heard of.

In commodities like propane, for example. With the U.S. Energy Administration Information (EIA) reporting this month that propane inventories in the American Midcontinent have hit an all-time low.

Stocks of this natural gas liquid in the central states have been plunging of late. With inventories for the second week of January coming in at just 11.5 million barrels.

That's the lowest amount of propane in storage recorded here since the EIA started tracking this data, in 1993.

These record-setting low levels come after propane stocks here have declined 43.5% over the past year. With strong demand for drying of corn in the region drawing propane supplies into the local market.

The timing of this jump in local consumption is threatening to become a "perfect storm" for propane prices. Because it comes at exactly the same time as propane exports out of the U.S. are also surging.

As the chart below from EIA shows, propane exports from the U.S. Gulf Coast took a quantum leap over the last few weeks. Rising nearly 30%, to a current 370,000 barrels per day.

Weekly US Exports of Propane

That's a big increase in propane leaving the country. At exactly the same time as domestic demand in the Midcontinent is ramping up.

The result has been propane prices seeing notable upward pressure. With rates in some parts of the country having jumped more than 15% over just a couple of days lately.

That trend will continue, as midstream operators increasingly look to send natural gas liquids to high-value markets overseas, in Europe and Asia. To the benefit of those companies doing the selling--and producers in areas that are positioned to meet this growing demand.

Here's to unusual opportunities,

By Dave Forest


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