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Market Snapshot: Western Canadian Propane Inventories at Record Highs, Prices at Edmonton see Record Lows
Release date: 2015-05-19
Since the Cochin pipeline stopped transporting propane in April 2014, volumes of propane have backed-up in Western Canada, unable to access higher-priced markets in the east, Midwest and Gulf Coast. The result has been record high inventories of propane in Western Canada since December 2014, and lingering low prices at the Edmonton/Fort Saskatchewan pricing hub.
Over a year has passed since the January and February 2014 propane shortage and price surge. Following the propane markets’ initial recovery, Canadian and U.S. inventories have grown to record levels and prices have fallen–a reflection of robust supply conditions and a return to a more normal winter. As of mid-May wholesale propane prices at the Sarnia (Ontario) and Conway (Kansas) hubs have been trading around 56 and 43 U.S. cents per gallon, respectively. Wholesale prices at Edmonton however, have continued touching on record lows, trading at around 3 U.S. cents per gallon in over the same period.
Figure Source and Description
Sources: Butane Propane News, NEB calculations
Description: This line chart shows propane prices at four major North American hubs: Edmonton, Alberta; Sarnia, Ontario; Conway, Kansas; and Mont Belvieu, Texas.
With the heating season over, the propane market has entered the injection season, where surplus propane is placed into underground storage to prepare for the next heating season. As of May 1st, total inventories in Western Canada were reported at 4.4 million barrels. If injection rates over the summer remain higher than historical norms, then it is possible that inventories of propane could come very close to the estimated working storage capacity of 9.4 million barrels by autumn.