The time for supply planning nears, and overall propane inventories appear to be ample. But don’t be lulled into a false sense of security by current conditions, says Tyler Kelly, director of supply and analytics, CHS Propane and NGLs. “In recent years, we’ve seen unexpected industry and global events quickly change the supply picture. That’s when having a good supply plan becomes critical.”
Unforeseen market influences
Factors that triggered natural gas price spikes on the West Coast this past winter are a good example of unforeseen market influences impacting propane supplies. Back in December, frigid temperatures and heavy precipitation in California increased natural gas demand at a time when inventories were low. At some western propane gas plants, production was curtailed.
“The impact on propane supplies was first felt in California but quickly spread up the West Coast and inland as far as Colorado,” says Kelly. “In states including Washington and Colorado, CHS propane accounts that had a supply plan in place had a plan B. If they had a supply contract with us, CHS bridged that contract with gallons from another source.”
Railroad delays were another outside factor that led to supply issues for accounts in the northern third of the U.S. this past winter, he notes. “When we understood an account’s needs, based on their supply plan and contracts, we were able to help by leveraging our transportation options to get them the gallons they needed.”
Little excess supply
Global demand and recently expanded U.S. export capacity have tightened domestic propane supplies in recent years, rarely leaving much excess product in the distribution system. “U.S. propane exports still have room to grow, compared to the previous year exports of 1.48 million barrels per day, which is still well below the US export capacity of 1.8 million barrels per day”, says Kelly.
Tighter overall U.S. supplies make the need for yearly supply planning critical, he adds. “Accounts should be analyzing propane volumes on a monthly and even weekly basis throughout the year, calculating how many gallons they need to pull in the summer, then considering all sourcing options. Looking at terminal volumes and reliability is often as important as price.”
Tools to simplify planning
Supply planning and management isn’t difficult when you have the right tools and resources. CHS account managers bring a wealth of information and connections to the process. “They can help in analyzing an account’s historic volumes and developing a supply plan that includes summer lifting to build allocations at a network of terminals for next winter.”
The CHS Propane Control Room makes it easy to track sales and propane contracts, allows for monthly changes using the Nominations tab, and is a great tool for communicating with account managers, says Kelly. “Using the propane control room’s daily position report allows you to see exactly where you are in terms of product sales and inventories and ensures that the whole team is on the same page.”
For help in developing or finetuning your team’s annual supply plan, contact your CHS account manager.
