Cost Management Solutions LLC Your Market Informant! The Propane Price Insider Reports 2016 M-PACT. Mark Rachal Director of Research/Publications

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2 Cost Management Solutions LLC Your Market Informant! The Propane Price Insider Reports 2016 M-PACT Mark Rachal Director of Research/Publications

3 Disclaimer The quotes and information contained herein are believed to be accurate and reliable, however Cost Management Solutions LLC does not guarantee or warrant the information in any way, nor do we assume any responsibility for the accuracy or completeness of the information. The prices addressed herein are affected by a variety of factors, including market events & trading activities of market participants. Recipients of this information are solely responsible for their decisions with respect to their transactions. Your Market Informant! 3

4 Presentation Goals Project future propane prices. Justify projections with fundamental data. Look at actions propane retailers should consider in response to recent fundamental changes. Your Market Informant! 4

5 Suggestion The process of projecting future prices can be a worthwhile exercise. But the high number of variables that affect propane prices can cause unforeseen events making any projection irrelevant. We highly recommend focusing more on the factors used to make the projections rather than the projections themselves, then diligently monitoring them for accuracy going forward. We fully expect to have to modify our projections in the future. The key is knowing what to watch and how to respond. Your Market Informant! 5

6 Crude Price Forecast Any projection of propane s price has to begin with projecting crude s price. Your Market Informant! 6

7 Propane and Crude Prices Since 2013 Crude Mont Belvieu $ $ $ But for Propane the most prices part crude can sets separate the price from direction crude Per Barrel $ $80.00 $60.00 $40.00 $20.00 $- Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Your Market Informant! 7

8 The Decline of Crude Prices WTI Crude Closing Prices Trading History D o l l a r s p e r B a r r e l $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 1/2/2008 5/2/2008 9/2/2008 Prices By late West Texas collapsed 2014 prices Intermediate to $35.40 were crude on beginning January reached 15, 2009 to slip $ near again, the on beginning but this time July 3, of the for Great a Recession, totally but soon different recovered reason. much of the loss. 1/2/2009 5/2/2009 9/2/2009 1/2/2010 5/2/2010 9/2/2010 1/2/2011 5/2/2011 Copyright 2016 [Cost Management Solutions LLC]. All rights reserved. 9/2/2011 1/2/2012 5/2/2012 9/2/2012 Your Market Informant! 1/2/2013 5/2/2013 9/2/2013 1/2/2014 5/2/2014 9/2/2014 1/2/2015 5/2/2015 9/2/2015 1/2/2016 8

9 Light Tight Oil Your Market Informant! 9

10 U.S. Light Tight Oil (LTO) Production Thousands of Barrels 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, By Despite 2006 the demand drop in from oil emerging prices countries 2008 and such 2009 as production China and of India LTO continued were stressing unabated oil supplies until putting March upward pressure on prices. Crude averaged $66.24 that year and interest in LTO production began to increase. From 2000 through 2005 LTO production was fairly flat with WTI crude averaging $35.28 during that period Axis Title Your Market Informant! 10

11 Total U.S. Crude Production 11,000 10,000 9,000 By 2015 U.S. crude production had In increased 2008 total 4,371 crude thousand production bpd in the to 9,344 U.S. was thousand down bpd. to 4,940 thousand bpd. 8,544 9,311 9,192 Thousands of Barrels 8,000 7,000 6,000 5,000 5,759 5,444 5,097 5,138 5,161 4,940 5,316 5,500 5,646 6,233 7,474 4,000 3, An 88% increase due primarily from LTO production. Your Market Informant! 11

12 The Decline of Crude Prices WTI Crude Closing Prices Trading History D o l l a r s p e r B a r r e l $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 1/2/2014 WTI crude plunged after the announcement eventually hitting a low of $26.24 on February 11, /2/2014 2/2/2014 4/2/2014 5/2/2014 6/2/2014 7/2/2014 8/2/2014 9/2/ /2/ /2/ /2/2014 Copyright 2016 [Cost Management Solutions LLC]. All rights reserved. 1/2/ Crude Price Needed for Balanced Budget Country IMF APICORP Algeria $ $ When By As OPEC mid-2014 prices met fell in Angola $ November through growing $ U.S. it Ecuador $ per Iran shocked production barrel $ markets crude was $ by Iraq not announcing $ $ a starting traders expected to drive Kuwait production $ cut. $ Libya OPEC down to $ oil announce prices. $ Nigeriaa production $ cut Qatar $ $ was changing its Saudi Arabia $ $ strategy from UAE $ $ Venezuela controlling prices $ to Average gaining $ market $ share /2/2015 2/2/2015 In fact it announced it 4/2/2015 5/2/2015 6/2/2015 Your Market Informant! 12 7/2/2015 8/2/2015 9/2/ /2/ /2/ /2/2015 1/2/2016 2/2/2016

13 OPEC s Strategy With the abundance of LTO OPEC knew any production cut it made would be offset by LTO producers. Its only logical choice was to use its considerable production cost advantage to drive high cost LTO producers out of the market. It assumed that LTO production would decline rapidly once prices fell below $70-$75 per barrel, which in 2014 was the breakeven point for most LTO production. Your Market Informant! 13

14 OPEC s Strategy (continued) It also assumed a recovering global economy would demand more oil. The expectation was that falling U.S. production and growing demand would allow more production by OPEC to be absorbed. It knew oil prices would be lower for a while, but the plan was to offset the lower cost per barrel by taking market share and selling more barrels. Your Market Informant! 14

15 U.S. Light Tight Oil (LTO) Production 5,000 Thousands of Barrels 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Parts of the OPEC strategy have worked. U.S. LTO production peaked in March 2015 at million bpd, just 4 months after OPEC s November 2014 announcement Axis Title Your Market Informant! 15

16 North American Active Oil and Gas Rig Count 3,000 2,500 2,000 1,500 1,000 By 1,794 3/11/2016 rigs were only drilling 414 rigs for oil were in North actively America drilling the for day oil, 386 OPEC in the announced U.S. and its 28 new in Canada. strategy /04/11 05/04/11 08/04/11 11/04/11 02/04/12 05/04/12 08/04/12 11/04/12 02/04/13 05/04/13 08/04/13 11/04/13 02/04/14 05/04/14 08/04/14 11/04/14 02/04/15 05/04/15 08/04/15 11/04/15 02/04/16 Your Market Informant! 16

17 OPEC s Successes U.S. drilling activity has dramatically declined. U.S. crude output is declining. In addition to decreases in LTO production other high cost projects, such as deep water projects, are being shelved. Consumption of gasoline is up. Alternative fuels projects and conservation efforts struggle in the current low-price environment. Russia and other major producing nations are projecting production declines as depleting wells are not replaced or well workover projects are delayed. Your Market Informant! 17

18 OPEC s Miscalculations U.S. LTO production held up better than expected for three primary reasons: Cost cutting dropped the breakeven point for LTO production to below $40 per barrel in many cases. LTO producers had a backlog of drilled, but not fractionated, wells that were put into service adding to production even as drilling declined. Many LTO producers had pre-sold (hedged) much of their production allowing them to continue making a profit even as prices declined. The global economy continued to struggle with expectations of growth in crude demand for 2016 of 1.2 million bpd down from 1.8 million bpd in Your Market Informant! 18

19 Factors Affecting Oil Prices in 2016 The backlog of uncompleted wells by LTO producers is Sanctions gone. against Iran have been lifted. Most Its LTO crude companies exports had did dropped not hedge from for to as 1.1 they million expected bpd while a price sanctioned. recovery by now. It increased exports to 1.5 million in February, Cost projects cutting exports measures of have million already in been March. deep, Potentially not much left another to be done. 875,000 bpd additional exports in coming months. LTO companies are projecting a 300,000 bpd decline in Saudi production Arabia, this Russia year. (world s The EIA is two projecting biggest producers), a 600,000 Venezuela bpd drop in and U.S. Qatar production. have agreed The IEA to freeze forecast crude non-opec production at to January decline by ,000 rates. bpd. LTO companies say they will start drilling again when prices reach $40-$45 per barrel. Your Market Informant! 19

20 Crude Average Price Projection Thirty-four analysts have made price projections for the next three years: Firms such as Goldman Sachs, Citigroup, WTI crude EIA, has Morgan averaged Stanley $32.64 and this other year major (through brokers March 17). and agencies. Combined these companies and agencies have tremendous resources and knowledge of oil markets. Projections as of February 2016 Average Projection High Projection Low Projection Price Projections by 34 Analysts Brent WTI Brent WTI Brent WTI $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Your Market Informant! 20

21 2016 Crude Price Forecast First Half Jan Feb Mar Apr May Jun Crude $ $ $ $ $ $ Second Half Jul Aug Sep Oct Nov Dec Crude $ $ $ $ $ $ In the first half of 2016 expect mild March weather, crude storage concerns and more Iranian crude coming to market to limit the upside. In the second half expect lower global crude production, increasing gasoline demand, and cold winter to firm up prices. Your Market Informant! 21

22 2017 Crude Price Forecast First Half Jan Feb Mar Apr May Jun Crude $ $ $ $ $ $ Second Half Jul Aug Sep Oct Nov Dec Crude $ $ $ $ $ $ In the first half of 2017 price will reach the point of triggering more LTO drilling, but impacts won t be felt for a few months. Prices will rise waiting on LTO production to pick up and offset demand. In the second half prices will settle down as LTO production impacts are felt and seasonal driving demand slows. Your Market Informant! 22

23 2018 Crude Price Forecast First Half Jan Feb Mar Apr May Jun Crude $ $ $ $ $ $ Second Half Jul Aug Sep Oct Nov Dec Crude $ $ $ $ $ $ In the first half of 2018 prices will be held in check by increasing production from LTO. In the second half prices will start firming as improving global demand picks up and supply begins to lag demand somewhat. Your Market Informant! 23

24 PROPANE Your Market Informant! 24

25 Propane Fundamentals Propane fundamentals are pointing toward a higher relative price for propane going forward. New export capacity and slow growth in propane production should allow supply and demand to balance. We need to look at trends in production, imports, exports, and petrochemical use to help evaluate propane s price direction. Your Market Informant! 25

26 Propane s Value as Percentage of WTI New Rising export production capacity sent and slower Mont Belvieu growth in production propane s already relative have value propane s as low as relative value 25% above of WTI its last five-year year. average. Your Market Informant! 26

27 Propane from Natural Gas Processing Propane production from natural gas processing was up 164,000 bpd last year for an increase of 17.2%. Your Market Informant! 27

28 Fuel-Use Propane from Refineries Fuel-use propane production from refineries declined 23,000 bpd, a 7.5% decrease. Your Market Informant! 28

29 Total Fuel-Use Propane Supplied Fuel-use Natural gas propane processing supply provided increased 141,000 bpd 79.8% last of year U.S. or propane 11.2%. production and refineries 20.2%. Your Market Informant! 29

30 2015 Production vs Rate of Production Growth The growth in fuel Change use from propane Previous Year production certainly looks 2008 healthy through But the rate of growth between 2014 and 2015 slowed Your Market Informant! 30

31 Rate of Growth in Propane Production The But trend now year-over-year had been for the growth rate is of slowing. propane This production slower rate during of growth a is month allowing to demand be higher and than the export previous capacity year. to catch up with production. For example from propane production increased by 138,000 bpd. So From far 2014 in we estimate it fuel-use increased propane 168,000 bpd. production has averaged 1,540 Year-over-year k bpd. That growth is the same accelerated 140 k per by 30,000 year growth bpd. rate seen in Year-to-Year Changes in Fuel Use Propane Production (thousands of bbls per day) Month Rate of Growth from previous year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Your Market Informant! 31

32 Natural Gas Supply U.S. Natural Gas Production and Imports Annual Growth billion cubic feet per day Gulf of Mexico Other U.S Net Imports Total Total But we natural are concerned gas supply about was the up 4.51 sustainability bcf or 6.1% of that between growth rate for the remainder of the year. Total Natural natural gas production/processing gas supply was up 3.40 drives bcf or propane 4.4% between supply Total The EIA natural estimates gas supply total U.S. is projected natural gas by the supply EIA will to be drop down this year 0.77 when bcf or all -0.9% production between and imports are considered. Your Market Informant! 32

33 Canadian Exports to U.S. The Canada However, difference shipped we between believe 41 million and exports 2015 barrels was dropped to only the U.S. 4.5 off million last because year. barrels. of That was the up closing 8 million of the from Cochin pipeline. So we think the true comparison is between 2013 and Your Market Informant! 33

34 Canadian Inventory Canadian inventory has dropped 3.6 million barrels year-over-year. That accounts That is almost for much exactly of the difference how in much exports exports of 4.5 million changed barrels between 2013 and and Your Market Informant! 34

35 Canadian Exports Conclusions Canadian In fact drilling exports activity increased would 8 suggest million barrels the opposite. between 2014 and As of March 11 Canada had only 70 rigs actively drilling However, for natural we believe gas, down 2014 from exports 135 a were year off ago. 3.6 million barrels due to the closure of the Cochin pipeline to propane The decreased service. drilling activity is likely to result in decreased exports to the U.S. Canadians simply caught up on those exports in 2015 to bring We expect down exports inventory. from Canada to the U.S. closer to 2013 levels of around 100,000 bpd and possibly less if their We own conclude domestic Canadian demand is import strong projections this winter. for 2016 should not be increased to reflect the increased imports in Your Market Informant! 35

36 Other Imports Due to lower imports from Canada and expected higher U.S. propane prices we expect to see increased waterborne imports into the U.S. East Coast over the next year that could result in 10,000 bpd or more of additional supply. Combined with Canadian imports that would put total imports at 110,000 bpd. Your Market Informant! 36

37 Petrochemical Propane Demand In 2013 petrochemicals decreased Ethane % the consumption Ethane Propane of propane of Propane and increased Jan ethane At the beginning 28.2% of Dec-13 the year propane was over 30% 22.0% of Oct-14 the feedstock stream dropping 24.0% to 22% Feb-16 by year s end Ethane increased 39.1% from 57 to 63%. By Oct 2014 ethane was From In at February Oct 24% 2014 of ethane propane to Jan was 2016 and Ethane s trading rising, petrochemical at value causing 39.1% dropped of from consumption propane 28.2% likely to use jumped 22% pushing to of propane increase resulting petrochemical from 252,000 in the coming demand decreased to to demand 393,000 over months. 400,000 for bpd. propane. bpd. Your Market Informant! 37

38 Petrochemical Outlook In Ethane March prices propane will prices get support have outpaced in the third ethane quarter prices upon to the the expected upside due completion to new propane of Enterprise s export ethane and propane export dehydrogenation project with a capacity (PDH) of capacity 10,000 coming bbls per on hour line or in about December. 5.4 million barrels per month. That could once again tighten ethane/propane values and increase propane Enterprise consumption. increased its LPG loading capacity from 16,500 bbls/hour to 27,500 bbls/hour. That increases export The new capacity DOW PDH from unit 9 million will certainly to 16 million help keep barrels per month. petrochemical propane consumption elevated. DOW But, as Chemical seen, petrochemical completed it PDH companies plant in are Freeport, extremely TX with price a sensitive capacity and of about we can 35,000 see a bpd. scenario where they drop from around 400,000 bpd of spec propane During consumption March to ethane 250,000 has sometime averaged 34.9% during of the propane next 12 down months. from 39.1% in February. We expect propane prices to continue to outpace ethane prices in the short term, slowing petrochemical consumption. Your Market Informant! 38

39 Yearly Propane Exports Just 10 years later it exported 224,651,000 barrels. Exports increased by 70,282,000 barrels between 2014 and In 2005 the US exported 13,686,000 barrels of propane. Your Market Informant! 39

40 Exports by Month Monthly Industry exports data shows increased exports by nearly continued 8 million to barrels grow in between January and December February likely of last year. exceeding 27.8 million barrels up from 23.3 million barrels in December Your Market Informant! 40

41 Barrels per Day of U.S. Exports Exports have increased between 299,000 and 329,000 bpd year-to-year. Your Market Informant! 41

42 Retail Market Demand US We retail believe propane the winter demand of dropped we off be last a high year demand to 541,000 winter and bpd result down in from demand 626,000 over the bpd next in months close to Your Market Informant! 42

43 Propane Inventory Change Data in thousands of barrels Per Day Annual Per Day Annual Per Day Annual Fuel Use Propane 1, ,497 1, ,786 1, ,463 Imports , , ,869 Supply total 1, ,405 1, ,247 1, ,332 Exports , , ,125 Petrochemicals , , ,267 Retail , , ,394 Demand total 1, ,231 1, ,818 1, ,786 Inv Build (Draw) (57) (20,826) 86 31, ,546 Annual Inventory Change Reported (20,769) 31,343 20,490 by EIA Annual Price Change In The 2014 Before 2013 result & supply 2015 looking was saw a at averaged 2016 supply let s 1,215 review outpace million k the bpd. annual demand inputs build for resulting Demand supply inventory, and averaged demand essentially big we what 1,272 inventory have the k bpd. EIA discussed builds reported. and for The drops previous result in was propane s years. The a 57 k bpd inventory price. average Then we ll draw draw on look at the inventory. resulted in impacts on higher inventory prices. and price. Your Market Informant! 43

44 2016 Projections Data in thousands of barrels Per Day Annual Fuel Use Propane ,100 Imports ,750 Supply total 1, ,850 Exports ,515 Petrochemicals ,445 Retail ,465 Demand total 1, ,425 Inv Build (Draw) 45 16, If we ignore some of our projections and just look at data as it occurred in December, U.S. propane supply would increase million barrels over the next 12 months. That would put them at around 88 million barrels at the end of next March. We do not believe this scenario likely. Your Market Informant! 44

45 2016 Projections Data in 2016 thousands of barrels Per Day Annual Fuel Use Propane ,100 Imports ,750 Supply total 1, ,850 Exports ,400 Petrochemicals ,445 Retail ,465 Demand total 1, ,310 Inv Build (Draw) (204) (74,460) If we just change the exports to reflect industry reports for February it would result in a 74,460,000 draw on inventory. Obviously this can t happen, but the only thing to keep it from happening is higher prices. Your Market Informant! 45

46 2016 Projections Data in 2016 thousands of barrels Per Day Annual Fuel Use Propane ,150 Imports ,150 Supply total 1, ,300 Exports ,875 Petrochemicals ,150 Retail ,125 Demand total 1, ,150 Inv Build (Draw) (90) (32,850) The Rising result propane will be prices a nearly will change 33 million all of the barrel input sources drop in over the propane next 12 months, inventory over helping the bring next 12 domestic months supply and that demand will leave more them in balance. more in line with traditional end-of-winter However we think levels. the prices necessary to do The this price will not pressure be is likely achieved to remain until the beyond market the sees winter a of significant decline in inventory. Your Market Informant! 46

47 Current U.S. Inventory Trend Such a significantly above average drawdown U.S. propane in inventory inventory illustrates has dropped the The five-year average conditions drop during are million in this place barrels to period has been pressure million this inventory year barrels. and what that has That makes this year s will only draw be been so changed far considered by higher a million barrels higher than prices. average. mild winter. Your Market Informant! 47

48 Summary of Supply Demand Factors We believe the growth in fuel-use propane supply will slow again this year. From growth of 140,000 bpd to 110,000 bpd. Fuel-use production will be million bpd, up from million bpd in Slower growth will come from decreased natural gas drilling activity resulting in lower or even negative growth in total U.S. natural gas supply. Propane from Canada will slow due to decreased drilling and the elimination of the 2014 inventory overhang during Imports from Canada will likely drop from 112,000 to 100,000 bpd. As a result of higher prices the U.S. is likely to see increased waterborne imports into the U.S. East Coast from Europe and Africa. Your Market Informant! 48

49 Summary of Supply Demand Factors U.S. exports of 960,000 bpd that were present in February cannot be sustained. Prices will have to rise to slow exports. What is hard to know is the long term contract arrangements with buyers of U.S. exports. These arrangements may limit the price sensitivity of exports for a while. Exports will increase this year to 775,000 bpd, up from 616,000 bpd in Exports could be much higher in the short term. Your Market Informant! 49

50 Summary of Supply Demand Factors Petrochemicals will be highly sensitive to the increase in propane prices over the coming 12 months. They will decrease use of spec propane from around 400,000 bpd at the start of the year to 250,000 bpd. Average consumption for the year estimated at 310,000 bpd and could be much less if winter demand puts upward pressure on propane prices. Your Market Informant! 50

51 Summary of Supply Demand Factors U.S. retail demand is likely to see a significant increase over the next twelve months as possible La Nina conditions cause severe winter conditions. Increasing prices could cause conservation and limit growth. Last year averaged 541,000 bpd in retail demand. We expect retail demand to average 625,000 bpd in the coming 12 months assuming normal to below normal winter temperatures and an average crop-drying season. Your Market Informant! 51

52 Summary of Supply Demand Factors Even though propane prices have been on the rise this year, the uptrend is likely to be controlled over the next few months. However, by fall we think the inventory trend will be putting significantly more pressure on prices especially if the outlook for crop drying and winter heating demand are bullish. Your Market Informant! 52

53 Propane Price Forecast 2016 First Half Jan Feb Mar Apr May Jun Crude $ $ $ $ $ $ Propane percentage of crude 44% 51% 52% 54% 55% 56% Propane per gallon $ 0.34 $ 0.37 $ 0.45 $ 0.44 $ 0.42 $ 0.40 Second Half Jul Aug Sep Oct Nov Dec Crude $ $ $ $ $ $ Propane percentage of crude 58% 62% 64% 66% 70% 75% Propane per gallon $ 0.44 $ 0.50 $ 0.55 $ 0.60 $ 0.67 $ 0.75 Propane relative value to crude is likely to rise for the remainder We expect of propane s the year. price to increase by 30 cents Any between pullback March in propane and December. prices will likely be connected to a fall in crude prices. Your Market Informant! 53

54 Propane Price Forecast 2017 First Half Jan Feb Mar Apr May Jun Crude $ $ $ $ $ $ Propane percentage of crude 85% 95% 100% 90% 80% 75% Propane per gallon $ 0.89 $ 1.09 $ 1.24 $ 1.20 $ 1.10 $ 1.07 Second Half Jul Aug Sep Oct Nov Dec Crude $ $ $ $ $ $ Propane percentage of crude 75% 75% 75% 75% 80% 85% Propane per gallon $ 1.04 $ 1.00 $ 0.96 $ 0.93 $ 0.95 $ 1.01 Tighter The drawdown in propane inventory this winter will Propane s inventory relative conditions value will will move keep higher propane in the prices at push around propane 75% to of 100% crude of even crude during by March the summer at $1.24 per winter months as domestic demand competes with months. gallon. exports for supply. Your Market Informant! 54

55 Propane Price Forecast 2018 First Half Jan Feb Mar Apr May Jun Crude $ $ $ $ $ $ Propane percentage of crude 90% 95% 85% 80% 75% 75% Propane per gallon $ 1.07 $ 1.13 $ 1.01 $ 0.99 $ 0.96 $ 1.00 Second Half Jul Aug Sep Oct Nov Dec Crude $ $ $ $ $ $ Propane percentage of crude 75% 75% 75% 75% 80% 85% Propane per gallon $ 1.04 $ 1.07 $ 1.11 $ 1.14 $ 1.26 $ 1.38 However, We expect by the this propane time the to price crude of relationship propane will to be repeat rising what occurred as the price in 2017 of crude with increases the exception reaching of a $1.38 softer by landing December coming out of winter as markets are less shocked by the tighter inventory conditions. Your Market Informant! 55

56 Conclusion and Recommendations We recommend aggressively hedging future supply needs early in this new cycle. We believe the pendulum has swung for propane prices. With the potential for much stronger demand over the next twelve months The low price cycle and the possibility of an upward trending experienced over the last year price cycle we believe retailers that has ended. hedge aggressively early in this cycle will have the opportunity to realize Consequently retailers should excellent margins and build goodwill consider taking increased with customers. action to protect their customers from higher prices. Price protection against rising price is available through February Obtaining price protection over this entire period should be considered. Financial swaps should be the primary tool used for price protection as they allow the holder to close early should the pricing environment forecast here be incorrect. Call options should be considered for shorter-term needs. As always, pre-buys should remain an important part of a supply price risk management program, as should building as much supply allocation as possible. Your Market Informant! 56

57 Drivers of Propane s Value Propane Fundamentals Propane s Value Crude Value Inventory Imports Natural Gas Value Demand Geopolitical Threats Supply Production Weather Heat Demand Petrochemical Demand Exports Weather Heat Demand Weather Elect Generation Weather Trop Storms Inventory World Emerging Countries U.S. Economy/ Currency Crude Gasoline Distillates HO/Diesel Inventory Days of Supply Refinery Utilization Reserve Capacity Imports Your Market Informant! 57

58 Propane/Propylene from Refineries Total propane/propylene production from refineries declined 28,000 bpd last year for an decrease of 4.8%. Your Market Informant! 58