We have all heard the phrase ‘we are living in unprecedented times’ to last a lifetime the past few years…but it would seem like we are not done with that reality just yet. Russia has full-on invaded Ukraine, nearly the entirety of Ukraine, while the world watches in shock and sadness. Commodities markets have been responding bullishly, with WTI crude oil trading over $100 for a brief time this morning. It’s currently trading over $97/bbl, after closing yesterday at $92.10. Propane values are also higher this morning than where they closed yesterday
Continuing with the theme of unprecedented times, propane inventories drew 3.9M/bbls for the week ending February 18th, 2022, according to the EIA Report released today. Inventories now sit at 38M/bbls, which is the lowest they have been for this week on the calendar in at least the past eight years and the lowest of the Shale Production Era for this time. Inventories stood at 43.09M/bbls this week in 2018, but those numbers included propylene. Still, our current 38Mbbl mark is over 5M/bbls lower than that level, so we may well be at our lowest, propane-only level, right now. We are also less than 2M/bbls away from the lowest season ending inventory level in the past eight years.
Gulf inventories are below 19M/bbls and are at their second lowest levels for this week since the winter of 2013-2014. Shale production was only just beginning during that winter, nowhere near the peaks it would hit in subsequent years, so we are also at shale era lows for Gulf related inventories. Exports were at 1.273M/bpd this week, their highest level since early January.
As things stand, the fundamental outlook for propane prices are incredibly bullish. We have inventories at the bottom end of seasonal averages, we may be heading into the next inventory building season with inventory levels reaching their lowest levels on record while we have the most significant geopolitical unrest since at least the second Gulf War, but the greatest ground invasion force involved in active war since 1939.
We have all woken up in a different world today…something we could say two years ago as COVID-19 began to wreak havoc upon the planet. This time, the black swan event was premeditated and intentional. The Western world continues to analyze and measure what their responses will be to Russia’s unprovoked aggression against Ukraine….and then, what will Russia’s response to the Western World be?
The stock market appears is turmoil, commodities are soaring and volatility reigns.