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.
I know markets are supposedly 24/7 these days, but come on, it’s the holiday season a coming. The market is starting to show signs of easing back, getting programmes sorted and balanced, not taking on any more positions that might need late nights and early mornings sorting out potential problems, instead allowing for late nights and early mornings having fun, albeit in a more thoughtful way, and by the way, that’s not a veiled parallel to our excruciatingly misguided Prince Andrew. But as always there’s bound to be something about to happens that’s going to ruin the party!
Over the last few weeks I’ve run a couple of blogs, as part of RBN Energy’s hallowed daily energy post, covering how the ARB works, how it relates to a physical cargo loading out of the U.S., and destined for Asia, and at nearly the same time as today’s SIMON SAYS hits the newsstands, a third blog will be posted that explains such glorified terms as the Argus FEI, the “Ginga” window and the standardized “Ginga” contract. Rusty and a few of the guys in Houston, and beyond, have then translated what I have said into good ole American lingo, and a fine job they’ve done too!
Do you think there’s a chance we might be saying to ourselves next year that “too many cooks spoilt the broth”? I think there’s a pretty good chance we will, especially if the main protagonists, in the U.S. Gulf’s 2020 LPG export trade, have to resort to competing with each other for a greater share of the export pie. The simple facts are that we are going to see a significant increase in fractionation capacity, an increase in export capacity along the U.S. Gulf coast, and an inflow of NGLs from the Permian Basin, aren’t we?
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.
In yesterday’s SIMON SAYS I explained the slightly more conventional relationships between motor gasoline and normal butane, as time fast approaches when the winter gasoline vapour pressure specification kicks-in, but as always, it’s in a market where the supply and demand factors are competing with each other to set new equilibriums, impacting prices along the curve.
One significant piece of the U.S. LPG export puzzle, taking something of a back seat behind record LPG production, NGL takeaway problems, lack of pipelines, fractionation constraints, Mariner East 2, export terminal expansions, IMO 2020 and the strong VLGC market, to name but a few, is the Panama Canal, which will have to come more into focus, it’s just a matter of time!
We had all packed our factor 50 Ambre Solaire sun cream, the latest Ray Ban sunglasses and the essential white floppy hat, ready for a couple of weeks in the sun. The LPG market was in its usual summer doldrums, so when we get back, batteries re-charged, we will be well prepared for the start of the pre-winter buying to commence. Well, all the holiday gear is packed, but the market is showing signs that it’s about to move in a different direction.
I’m getting a far better understanding for what is happening to stocks in the US at the moment. Clearly, they are a lot higher than last year and look as if they’ll push through 5-year highs sometime in June, but if the US winter hits hard and earlier in 4Q this year we might be heading for trouble.