I think what has characterized the world I live in over the last week, as well as the LPG market itself, has been a number of surprises, and how situations we have been talking about for weeks and months, now look as if they have come true, beyond any reasonable doubt. We are waking up to a new set of parameters, that will make the next two or three months interesting, if not a lot more predictable. Here in the U.K. most of the country were surprised, in fact very surprised, to see Boris Johnson, and the Conservative Party, storm to victory by such a huge majority.
I hope it’s been a good Thanksgiving for producers, mid-streamers, exporters, consumers, in fact anyone connected with the U.S. NGL business. I was pleased to see that I wasn’t the only one linking propane to Thanksgiving, as I came across a lovely website and a blog produced by Blue Rhino, who appear to be an “exchange of cylinder” driven retailer. Well they have published a blog called “The Beginner’s Guide to the Perfect Thanksgiving Meal”, and in the first paragraph they have mentioned the word “grill” 4 times, just to make sure I have an idea of what’s coming next.
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?
The beauty of the U.S. NGL market is that it’s full of statistics, in fact, America does statistics very well, just take a look at American sports and you’ll see why. With so many numbers to digest in the NGL world, it tends to draw our attention to the U.S. more often than not, maybe too much. Not surprisingly it does influence what I see and think, and I’m starting to believe the U.S. has taken over as the driving force of the whole international market.
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.
Over 30 years ago I made my first, and until last week, my most recent visit to Mont Belvieu, Texas, about 40 miles to the east of Houston, along Highway Interstate 10. In the 1980s, I remember there were a few pipes poking out of the ground, and I had just visited Enterprise’s already impressive Terminal, I won’t say export terminal, as they were doing both exports and imports at the time. But now the whole area is a vast array of fractionation towers sprouting up in all areas. Some tall, some not so tall, but none were small.
I’m really enjoying looking in on the LPG market from the perimeter fence for once, and there’s no bigger question on my mind than, when? The “when” relates to when are we going to see somebody in the LPG shipping market really break the new building ice, not just crack it in a couple of places. The gauntlet has been thrown down, but will anyone pick it up?
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.