I’ve always been fascinated with the way deals are done, the process of negotiation between two parties, maybe with someone in the middle, maybe not. It can be exciting, frustrating, win some, lose some. I think I was more a guy who wanted compromise, while I ended up doing deals with a number of traders hanging out for the last cent, even though I’m sure I would have done more with them if only they had shown a sign of compromise, it’s always good to blame the other party.
On Friday I decided to try and explain what lays behind the EIA’s weekly inventory numbers, the numbers they know, and the ones they don’t. Although there is a degree of uncertainty regarding production, at least there was a number we could decipher, as there also was for imports and exports, but that’s about where it all stopped. I mentioned we had to make a lot of assumptions, the biggest one being U.S. domestic propane demand. Are we getting it right or wrong?
It’s a bit like trying to find a red bus on London’s Oxford Street when you really need one, just when the market could have done with a few extra LPG cargoes appearing from the U.S. Gulf, as well as more clarity on when new midstream and export expansion capacity was about to arrive, nothing much happened, but the clock keeps ticking, and with the blink of an eye we will be seeing in the New Year, 2020. It looks to me as if all those red buses are going to arrive pretty much all at once, but will we have enough passengers, or in our world, NGL production, to fill the bus up.
We make decisions every day, some good ones and some bad, normally those judgements are made to get things done, but on occasions traders will decide to do nothing, to wait, for a market to move to their desired target, or to wait for something to just change. As we approach a significant period in the year, where seasonality starts to have an increasing influence on our market, traders are naturally a little hesitant, waiting and wondering what happens next.
In yesterday’s SIMON SAYS I suggested that the perceived axiom of U.S. shale development’s future, the export barrel, was having a degree of doubt bestowed upon it., Albeit a somewhat near-sighted view, but as people say, be careful what you wish for! With U.S. inventory levels teasing the record peaks of November 2015, a lot is hinging on the weather in the U.S., and in case it might come as a late, but very welcome saviour.
There’s an unusual feel about the LPG market at the moment, with a number of questions that just seem too difficult to answer, some may never get answered. One question though that always seems to be on the lips of LPG players around the world is the weather. It’s not just the way us Brits, as we are affectionately referred to here in Texas, start a morning conversation, it’s also what drives our market, especially over the next couple of quarters.
Labor Day is pretty much over, and there are maybe 6-7 weeks left of what my American colleagues call the injection season for U.S. propane inventory. It could well be a very crucial period for the U.S. propane market, and for that matter the whole international market structure. I’m trying to gauge whether we are really going to see U.S. structure continue to gain ground on its co-markets especially in Asia, but Europe as well.
The summer holiday clothes, the sun cream and photos, are now all destined for the physical and electronic storages, the kids are back, or going back, to school (hooray!), the northern hemisphere nights are drawing in, Love Island is but a dream and those winter TV series are all about to re-start! The structure of our lives is therefore about to change, so why not the structure of the LPG market?