US propane and propylene stocks rose 3.46 million barrels to 53.12 million barrels the reporting week ended Friday, according to an Energy Information Administration report released Wednesday.
The stock increase was well above industry estimates, which had expected an increase of around 1.6 million barrels. The Midwest storage build raised the most eyebrows, however, up 1.757 million barrels to 17.81 million barrels.
"The Midwest build looks suspicious," a Gulf Coast NGL trader said. The prior ten-year average for the second week of June was 838,000 barrels, indicating that the Wednesday storage number for the Midwest region was more than double the average.
"I was a bit surprised by the week-over-week build," said Peter Fasullo of EnVantage. "Maybe the EIA is double counting barrels at some point. The opening of the Southern Hills pipeline would indicate that stocks should be falling in the Midcontinent."
The differential between Conway and Mont Belvieu traded at 2.75 cents/gal for June, well below the 26 cents/gal differential seen this time last year and an indication that there is less of an incentive for shippers to move product from the Midcontinent to the Texas Gulf Coast.
"There was a very large build in the Midwest but we did verify this as we noticed the large increase as well," said Jim Beck, lead analyst with the EIA's weekly petroleum supply team. "There is a lot of noise in the data series that seems to be an ebb and flow, but the data is verified and looked good to us."
Additionally, last week's storage number for the Rocky Mountain and West Coast regions was revised lower by 680,000 barrels to 1.43 million. The Rocky Mountain and West Coast revision in turn impacted the total stock build from last week, putting it at a 2.623 million barrel build, up to 49.66 million barrels.
East Coast supplies increased by 321,000 barrels to 3.528 million barrels, Gulf Coast stocks climbed 1.234 barrels to 30 million barrels and West Coast/Rocky Mountain inventories increased from the revised number by 149,000 barrels to 1.58 million barrels.
Stocks of propane and propylene for nonfuel use were 19,000 barrels lower, at 3 million barrels.
Gulf Coast and Midwest propane prices were moving lower on the larger-than-expected build. Propane at Mont Belvieu, Texas, was trading at 81 cents/gal, 1.5 cents/gal lower while Conway, Kansas, propane was trading at 78.65 cents/gal 60 points lower from Tuesday's assessment.
