THE PROPANE BUZZ --- JANUARY 2024 |
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We will chat about the upcoming FRIGID outbreak that is barelling down on the United States here in a few minutes, but first, let's take a look at some salient aspects in the markets as we begin the first full business week of 2024.
First up, a look at the prospects of propane exports from our friend Simon Hill at Cazbaa Energy:
"The U.S. market appears more balanced, with the stock draw of just over 2 MM Bbls being what we would expect at this time of year. Although Product Supplied (aka demand) did edge down a little but is around average at over 1.35 MM Bbls/d, which the same could also be said for exports, slightly down but again coming in above 1.7 MM BBls/d, despite ship arrival dates appearing to retreat. Production is also holding firm above 2.6 MM Bbls/d. Despite the ARB being closed we still have bids in excess of 5 c/g and offers above 8 c/g, but nothing’s passing the deal litmus test.
With auction fees for spot Panama Canal transits slipping quickly down to the few hundred thousand dollars, way below pre-Christmas times and a couple of VLGCs securing passage via the 1A system, which was felt more onerous only a few weeks ago, there might still be room for rates to reduce, driven by better cost management, but whether this will re-open the ARB, well that’s anyone’s guess."
You can find the entire article at this link. I think that Propane Exports will be one of the biggest (if not the biggest) 2024 stories to watch for our industry. The drought at the Panama Canal is not something that you can 'prepare' for, as we have been discussing, and Simon's area of expertise is in propane and LPG exports. The trading ARB is not favorable right now, and that is something that bears watching, as volumes that might otherwise be headed for the export market could back up at some point in time in 2024, which could lead to bearishness on pricing, but could also lead to carry conditions in the market.
Next up, Flashpoint's Darius Lechtenberger shares his morning thoughts on the markets here:
"WTI crude oil and refined product prices are trading to the downside this morning. This morning's price weakness appears to be linked to Saudi Arabia, which has responded to increasing global supply and competition by significantly reducing the February official selling price (OSP) of its flagship Arab Light crude to Asia, marking the lowest level in 27 months.
Supporting the prevailing bearish sentiments, John Kemp of Reuters highlighted that the net position across all three crude contracts hit a record low of 128 million barrels on December 12. Additionally, Goldman Sachs notes that Hedge Funds are the least invested in Energy Stocks in the past 5 years. On the flip side, Goldman Sachs also warns of a potential doubling in crude oil price in the event of an extended disruption in the Strait of Hormuz, describing the situation as a 'powder keg'. Although the market currently views this scenario as improbable, recent events involving groups like the Houthi, effectively disrupting Red Sea traffic, raise concerns about the perceived ease of obstructing passage through the Strait of Hormuz. Winter is finally arriving this week with a Polar Vortex pushing thru nearly all of the U.S….stay warm and sell some propane!"
Simon also talks more about the Straight of Hormuz in the linked write-up above, and I would recommend giving it a read.
And now, we turn our attention to the weather forecast, which for the first time in many Januarys, looks to be a positive thing to discuss.
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EXTENDED FORECAST FROM BAMWX.com |
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The next 10 to 15 days have a chance to yield some of the coldest air we have seen in January for many parts of the country in several years. As you can see in the days five to eight-time frame below, most of the USA is in a below-normal state. We've seen this type of cold come for a day or two and leave in recent years, but it's been a minute since we have seen coast-to-coast below normals like this. The biggest question now isn't whether or not this will happen, it will. Rather, it's how long will this cold stay? There is currently some model disagreement on that and it's still to early to know for certain...we will continue to share updates as the week progresses. |
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As we have been saying and writing for a long time, pricing volatility is the new normal in the propane industry, whether we like it or not. This is different from our parent's or grandparent's propane industry...and in some cases, purchasing our propane the way we have always done it will not allow you to maximize the margin potential in your area.
That is not to say you need to scrap everything you are doing and look at doing everything differently. Still, you owe it to yourself, your employer, and your family to take a long, hard look at how you can add more margin to your business.
We consult and sell physical and financial propane products to companies nationwide. We help propane retailers mitigate the financial risks involved with their propane supply, even if we don't sell them a physical drop of gas.
The video above (also linked here), which is just three minutes long, asks you a few questions relative to your propane supply...and if some of the things I talk about in this short video are foreign to you, that may be a sign of additional profits you are leaving on the table...and we would love to set up a time to speak with you. THIS LINK takes you to a simple calendar sign up page, where you can reserve a time to speak with Jon Miller and Darius Lechtenberger, two of the partners at Flashpoint Energy Partners and industry veterans who have been involved in propane wholesale, consulting, and risk management since the 1990's. There is no cost for this consultation, and you have zero obligations. In other words, you have nothing to lose and everything to gain, and we will shoot you straight; the proof is always in the numbers.
So click on this link today and set an appointment to speak with us over Zoom, and let us show you how to add more profits back into your propane business as opposed to giving those profits away to others.
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WHO ARE FLASHPOINT ENERGY PARTNERS? |
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Some of you have received The Propane Buzz since its inception in 2013. Others have been here a few months or years. Regardless of your tenure here, I want to bring something to your attention.
The Propane Buzz is a part of Flashpoint Energy Partners, a full-service propane wholesale company. By full service, we sell physical propane at various locations nationwide. That is what we do, be it spot-load deals, traditional fixed-priced deposit contracts, or traditional index contracts.
In conjunction with our physical product offerings, we offer all traditional financial instruments (i.e., puts, calls, and swaps) to allow retailers to hedge their physical positions. Scores of propane retailers, just like you, are already working with us and protecting not only their physical supply but also their retail propane margins.
Our industry is only getting more competitive with each passing year, so every penny added to your bottom line counts and increases your business's value. We would love to discuss how we can help you maximize margins and use the numerous tools and instruments available, regardless of your business location.
If you want to learn more about how we can add value to what you do, please email us at [email protected]. As always, thank you for your time and for reading The Propane Buzz. - Jon Miller
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Flashpoint sells propane and other NGL's across the United States, in addition to offering hedging and consulting services for propane retailers from coast to coast.
We are talking with dozens of propane retailers every day, helping them secure and manage their supply. If you are interested in learning about how we can help you, email us at [email protected].
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BAMWx.com are the official meteorological partners of The Propane Buzz and Flashpoint Energy Partners. BAM offers commercial weather services specifically tailored to several industries, including Ag and Energy.
BAM also has a very popular App Service, The Weather Porthole (www.weatherporthole.com) where there clients have access to current and long term forecasts unique to a specific location or locations.
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Trading carries a risk of loss and is not appropriate for everyone |
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