According to the U.S. Energy Information Administration website news article published on May 3, 2023:
U.S. propane consumption this winter was the lowest on record
We estimate U.S. propane consumption (measured as product supplied) during the winter heating season (October through March) averaged 33.6 million barrels per month, or 1.2 million barrels per day (b/d), which is the lowest on record for a winter heating season (Figure 1). Based on our recently released Petroleum Supply Monthly (PSM), average propane consumption during the three coldest winter months (December, January, and February) averaged 1.1 million b/d, the lowest on record since EIA started collecting the data for those three months, with warmer-than-normal temperatures. U.S. propane consumption is highly correlated with the number of heating degree days, a measure of how cold temperatures are over a period of time.
Reduced demand led to lower U.S. propane prices than last winter. Wholesale propane prices at the U.S. benchmark location of Mont Belvieu, Texas, averaged $0.81 per gallon (gal) during the 2022–23 winter heating season, while wholesale propane prices averaged $1.28/gal the previous winter heating season (Figure 2). Mont Belvieu prices were lower because above-average temperatures reduced propane consumption in the residential and commercial sectors, particularly in the Midwest and Northeast where 54% of the more than 6 million U.S. households that report using propane as a primary space heating fuel are located.
Propane inventories reflect supply and demand balances, and their levels also affect prices. The propane storage injection season typically runs from April through September, followed by a withdrawal season during the winter heating months. For the week ending October 7, 2022 (the first week of the winter heating season), we reported U.S. propane inventories at 85.5 million barrels, 0.8 million barrels more than the five-year (2018–22) average (Figure 3). Propane inventories were near the bottom of the five-year range before the winter heating season, from the beginning of July to the end of August. Propane inventories built by 21% (15.6 million barrels) from the first week of September to the first week of December. U.S. propane stocks have built 2.1 million barrels during the first four weeks of the 2023 injection season, totaling 58.3 million barrels as of April 28.
Propane consumption can be high in the fall because it is used for agricultural grain drying, but factors this season reduced consumption. Agricultural demand for propane occurs early in the heating season, usually peaking in October or November, but can vary year to year. Propane inventories built quickly at the beginning of the winter because of less demand for propane as a grain drying fuel, especially in the Midwest, where about 90% of the U.S. corn crop is grown. Propane inventories in the Midwest grew by nearly 2 million barrels, from the week ending October 28 to the week ending November 28, starting below the five-year range and growing to above the five-year range. Inventories typically decline from October to November by about 4 million barrels.
The warmer-than-normal winter in the United States led to lower U.S. propane prices compared with prices at benchmark hubs in Northwest Europe and East Asia (Figure 4), resulting in the most U.S. propane exports on record during a winter heating season. The price spread between Mont Belvieu and prices in Northwest Europe and East Asia was wider than any since January 2020.
U.S. propane exports to Europe established new record highs in the summer of 2022 because of uncertainty about propane supply due to Russia’s full-scale invasion of Ukraine and related sanctions. U.S. propane exports to Europe averaged 236,000 b/d from April to September 2022, a 66% increase compared with the same time the previous year (Figure 5). The trend of elevated U.S. propane exports to East Asia, because of strong petrochemical demand, has further supported U.S. propane exports. Consumption of propane as petrochemical feedstock is driven in part by increasing demand for propylene (a base chemical used in the manufacturing of polypropylene, a fiber used in the production of car interiors, packaging, and personal protective equipment). Japan is the largest importer of U.S. propane, followed by China and South Korea.
For questions about This Week in Petroleum, contact the Petroleum and Liquid Fuels Markets Team at 202-586-5840.
