Market Snapshot: Propane inventories in western Canada at record high for start of heating season
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Release date: 2020-11-18
Underground inventories of propaneFootnote 1 in Canada reached a record high for 1 October 2020 at 2.376 million cubic metres (106m3) (14.9 million barrels (MMb)). The largest inventory was in western Canada (Alberta and Saskatchewan), which has 1.489 106m3 (9.4 MMb) – 44% above the five-year average. Inventories in Ontario were 37% above the five-year average at 887 103m3 (5.6 MMb). Inventories in western Canada and Ontario were both considerably higher than inventories reported on 1 October 2019, when underground inventories were at their lowest levels in over five years. The latest numbers indicate ample supply for the typical winter heating season, which generally spans from October to April.
This year’s propane injection season (April to October) coincided with the COVID-19 pandemic. COVID-19 resulted in major changes to energy supply and demand in North America and globally. Over this period, propane production in Alberta declined to lower than average spring values. Propane exports to major markets such as the U.S. Midwest and Gulf Coast declined significantly, marking a notable reversal in the multi-year trend of export growth. Furthermore, low propane prices early in the season caused sellers to put propane into storage in the hopes of higher winter 2020/21 prices. All this resulted in the largest propane inventory builds (1.981 106m3, or 12.4 MMb) for Canada in recorded history.
Figure 1. Underground Inventories of Propane in Canada
Source and Description
Source: CER – Underground LPG Inventories
Description: This graph illustrates propane inventories in western Canada and Ontario. The graphs show 2019 and 2020 underground inventories, the five-year average, and the five-year range. In 2020, inventories in Ontario reached a low of 126.3 103m3 (0.8 MMb) in April. Inventories in western Canada reached a low of 243.5 103m3 (1.5 MMb) in March. Inventories in Ontario reached a high of 887 103m3 (5.6 MMb) in October. Inventories in western Canada reached a high of 1 489.4 103m3 (9.4 MMb) in October. Average inventories for October in Ontario are 649 103m3 (4.1 MMb). Average inventories for October in western Canada are 1 031.6 103m3 (6.5 MMb).
Wholesale propane prices at the Edmonton and Sarnia hubs heading into the 2020/21 heating season are similar to prices from last October. Propane prices in Canada were largely unaffected by the pandemic, with Edmonton prices remaining between 44 and 47 U.S. cents per gallon between March and September, while Sarnia prices increased from 50 U.S. cents per gallon in March to 59 U.S. cents per gallon in September.
Figure 2. Propane Prices in Canada
Source and Description
Source: Butane-Propane News, CER Calculations
Description: This graph illustrates propane prices at two propane hubs (Sarnia, Ontario; and Edmonton, Alberta) between January 2019 and October 2020. Prices are show in U.S. cents per gallon. Also shown are two key events that occurred over this period: the start of the CN strike on 19 November 2019, and the WHO declaring a public health emergency on 30 January 2020. In October 2020, prices at Edmonton averaged 47 U.S. cents per gallon and prices at Sarnia averaged 64.9 U.S. cents per gallon.
Propane stored at Sarnia arrives primarily by Enbridge Line 5 or rail tank cars. Propane is then transported to end users in eastern Canada and the U.S. Northeast by rail and truck. Last winter, the propane supply chain in eastern Canada was affected by two notable disruptions. In November 2019, a nationwide CN Rail strike contributed to large price spikes at the Sarnia hub and shortage concerns for end users in eastern Canada. In February 2020, shortage concerns in eastern Canada continued because of rail blockades that forced temporary rationing of propane supplies in eastern Canada.
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