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Propane Build Misses Estimates...Pushes Prices to Weekly Highs

By: Energy Team - New York, Energy New York

Propane Build Misses Estimates...Pushes Prices to Weekly Highs
 
Peter Rowley
Risk Manager- prowley2 (ICE)

WTI cruised to a 3-month high on the back of a 7.27MM bbl release from the SDR netting out to a 2.03 MM build was enough to propel Jul22 WTI futs as high as $123.18/bbl. We are quickly nearing the highs set at the onset of the invasion of the Ukraine War and the only solace bears are holding on to it seems is questionable ramped up production out of OPEC+ and eventual demand destruction. Nat Gas prices sold off aggressively at mid-day following an explosion at the Freepoint LNG facility which is expected to back out of ~2 BCF/day of demand causing Jul22 NG futs to trade in a $1.25/mmbtu range with losses currently ~6% at $8.74. Equities were under pressure on lighter volume as traders are turning their attention to Friday’s inflation numbers, which continue to be sobering for Central Banks.

Front Month TET propane futs had their widest range in two weeks by trading in a 3.375cpg range from $1.23-1.26375. Jul22 opened the session on those lows totaling losses of as much as .875cpg but a smaller than expected build in inventories in this morning’s DOE report pushed the curve higher. Conway lagged TET’s advances as PADD2 stocks were seen increasing 1.44MM bbls while Gulf Coast inventories dropped unexpectedly by 447k. Jul22 TET closed out the session near $1.25125/gal, a gain of 1.25cpg or 1%.

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DOE report weekly fundamentals recap
Inventories surpassed 50MM nationally for the first time since the third week of January but grew just 661k bbls WoW, nearly 1.9MM below the average OPIS estimate. The previous week’s numbers grew larger than anticipated by swelling 3.24MM bbls so this week’s numbers could be more of normalization but the 2-week cumulative build of 3.9MM comes in well below the same period last year where inventories grew by 9.58MM. Current stocks are now 3.4MM bbls below last year and have reversed the recent course of shrinking the current deficit to the 5-year seasonal average as we now stand 6.6MM bbls below that marker.
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The decline in exports for week ending June 3rd was right in line with our analyst’s expectations, as loadings dropped 319k b/d or 23.8% WoW. The pullback to 1.023MM b/d is the lowest since mid-February and is largely a reflection of closed arbs to Asia. Domestic Propane prices will need to remain softer to encourage Chinese PDH demand to reemerge but lower OSP’s and high Asian LPG inventories could keep exports from exploding higher. Despite US loadings seeing a drop WoW, both East Coast and Gulf Coast stocks saw counter seasonal declines of 540k and 29.91MM bbls respectively. Midwest stocks saw an outsized build of 1.44MM and are now 1MM higher than last year, this disparity pushed the Jul22 N/S out over 1.00cpg as the basis was seen trading -1.75cpg on legs post stats.

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