Home / Opinion / U.S. propane stocks hit record despite strong exports: Kemp

U.S. propane stocks hit record despite strong exports: Kemp

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

LONDON – Liquefied petroleum gases (LPG) are the fastest-growing category of hydrocarbon exports from the United States, with volumes up almost four-fold since 2012.

Exports have grown from less than 200,000 barrels per day in 2012 to an average of 743,000 bpd so far in 2015 and as much as 821,000 bpd in July, according to the U.S. Energy Information Administration.

LPG exports include a range of light hydrocarbons ranging from ethane, ethylene, propane and propylene to normal butane, butylene, isobutane and isobutylene which are pressurized for convenient transportation.

LPG is produced from natural gas processing plants, condensate splitters and oil refineries and has a wide range of applications from petrochemical feedstocks to motor fuel, grain drying and residential heating and cooking.

Unlike crude oil, LPG is treated as a refined product and can be exported with few restrictions, a position the U.S. Department of Commerce confirmed in 2014.

Traditionally, most LPG has been marketed in neighboring countries, including Canada, Mexico, Central America and the Caribbean.

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In 2012, neighboring countries accounted for 55 percent of all LPG exports, rising to almost 80 percent if South America is included.

By 2015, however, the total share of LPG exports to other countries in the western hemisphere had dropped to just 53 percent.

Exports to Europe, Africa and especially Asia have surged and now account for nearly half of all the LPG shipped abroad.

China has overtaken Canada and Mexico as the most important export market for U.S. LPG, taking more than 24 million barrels, almost 100,000 bpd, in the first eight months of 2015.

U.S. LPG exports are now competing directly for market share in Asia with condensates marketed by Nigeria, Saudi Arabia and Iran.

Marketing surplus U.S. LPG has become an increasingly important business for trading houses such as Vitol and Gunvor.

Even so, the domestic market has remained over-supplied, especially this year, when a mild start to winter has cut heating demand, and a relatively dry late summer and autumn has depressed demand from grain driers.

Stocks have propane and propylene in commercial storage hit a record 106 million barrels last week, roughly 27 million barrels, or 34 percent, higher than at the same point in 2014.

Propane and propylene stocks are a massive 42 million barrels, 66 percent, above the long-term average for this time of year.

As a result, residential propane prices have fallen to less than $2 per gallon, down 19 percent compared with 2014, and the lowest level for the time of year since 2006.

(Editing by David Evans)

This article was from Reuters and was legally licensed through the NewsCred publisher network.