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Propylene Inventories Rise


USGC propane, propylene stocks hit record on rising production: US EIA


Houston (Platts)–17Jun2015/404 pm EDT/2004 GMT



Rising production drove US Gulf Coast propane and propylene stocks to another record high in the week ended June 12, according to data released Wednesday by the US Energy Information Administration.

The Gulf Coast posted the highest regional build of 1.01 million barrels to 51.2 million barrels, a record. Gulf Coast stocks have reached record highs in six consecutive weeks and are now 26.3 million barrels higher than the previous five-year average for the corresponding week.

Total US stocks rose 1.87 million barrels to 80.7 million barrels in the reporting week, while product supplied, which reflects demand, rose 1.4%, the EIA said.

US stocks stand 29.4 million barrels higher than last year's ending stocks for the corresponding week. Stocks are also 31.4 million barrels higher than the previous five-year average for the same week, EIA data showed.

A wide contango throughout June has helped encourage storage, though the build was taking place before that. June Non-LST propane at Mont Belvieu was 40.25 cents/gal on Friday, 2.50 cents lower than the July barrels. That contango has since widened to 4.25 cents.

Propane prices have been on the decline in June, hitting a 13-year low of 32.625 cents/gal June 5. Bentek analysts cited the massive stocks as an indicator of the bearish market, with production outpacing demand.

Implied demand rose 14,000 b/d, or 1.4%, to 1.04 million b/d during the reporting week. But US stocks rose at a higher rate despite the higher demand, which might be due to better refinery utilization.

Refinery utilization was at 93.1% in the US compared with 87.1% year ago. As a result, propane and propylene production from refiners and blenders rose year over year by 46,000 barrels to 903,000 b/d, according to the EIA data.

The petrochemical industry has in the past been able to step in with additional demand when propane prices dip, but demand for propane as a feedstock has fallen in recent years, Bentek said. Steam cracker demand in July 2013 averaged 525,000 b/d, but first-quarter demand of the same type averaged 366,000 b/d.

Exports, too, have slipped. Even with increasing export terminal capacity — Enterprise Products Partners and Sunoco Logistics increased Gulf Coast LPG terminal capacity by 290,000 b/d in 2015 alone, Bentek said — exports averaged 449,000 b/d, unchanged from the prior week and down from 648,000 b/d in February, according to the EIA data.

Midwest stocks rose 891,000 barrels to 21.64 million barrels last week, compared with a 9,000-barrel build in the comparable week last year.

Atlantic Coast stocks fell 62,000 barrels to 5.03 million barrels but still shows stocks are 1.1 million barrels higher than the previous five year average.

US stocks of propylene for nonfuel use fell 3,000 barrels week on week to 5.37 million barrels.