According to Energy Information Agency the demand for propane (measured as product supplied) is expected to diminish due to the lower demand from petrochemical plants. An average demand for propane – which is used to produce everyday objects such as roofing, carpets, bottles, and bendable plastics – is expected to be 100,000 barrels per day (bbl/d) lower in 2014 in comparison to 2013, according to EIA’s Short-Term Energy Outlook.
Apart from some seasonal use – as a heating fuel in winter and as a crop-drying fuel during the harvest season – propane is predominantly used by the petrochemical industry.
Beginning in mid-2013, higher propane prices reduced the demand from petrochemical users. As the difference between the price of propane and ethane widened in 2013, petrochemical plants switched over to make ethylene from ethane, rather then propane. EIA does not expect ethylene plants to switch back to propane feedstock in the coming year, as growing ethane supply is expected to continue to lower ethane prices compared with propane.
This is bad news for propane producers as the record amounts of propane resulting from the shale boom have managed to push the prices down. Propane prices are down 39 per cent from a high of $1.70 a gallon reached in January, when a severe winter boosted demand for the fuel to heat American homes.
EIA thinks it possible that the construction of several propane dehydrogenation plants, producing propylene for chemical and plastic manufacturing, which are expected to start operating in 2015-16, might give propane market a boost. Others look towards foreign exports.
Unlike most other types of U.S. crudes, propane can be shipped abroad. Consequently, in October, propane and propylene exports climbed above 400,000 barrels a day for the first time and have held above that level in five of the nine months since, according to EIA data going back to 1973. The EIA doesn’t separate its data for propane from propylene.
Whether the amounts of exported propane will be enough to nudge the price upwards is not clear. Some market experts are not convinced. Thanks to the abundance of propane produced from shale, production of the chemical reached a record high of more than 1.6 million barrels a day in the week ended on Sept. 19.
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