Labor Day is the one of the most important holidays of the year, marking the start of the 12 most exciting weeks in all of sports: the college football season. Although this year’s opening slate of games were lopsided (to say the least), college football is officially back and that means cooler weather is just around the corner. While propane demand usually sees an uptick as winter approaches, this year could see an unexpected boost as a result of COVID-19: more propane patio heaters for socially distanced outdoor dining.
*Note: today’s Energy Market Commentary may be slightly educational, but is mostly for fun.
Unlike other NGLs, propane demand shows strong seasonality due to its prevalent use for residential heating. Each year, the first few weeks of September generally mark the end of a weaker summer demand, giving way to a steady increase in demand through the end of the year. This trend should continue in 2020 as propane demand has been largely unaffected by the impacts of COVID-19, with 2020 demand generally outperforming 2019 demand for most of the summer.
Not only has propane demand remained resilient, it could possibly see an unexpected boost this fall as restaurants look to propane-fired patio heaters to keep their socially distanced patrons warm. New York City has granted over 10,000 outdoor permits allowing restaurants to seat people outdoors. According to data from the NYC Health Department, that’s approximately 38% of the 27,000 restaurants in NYC. Assuming a similar percentage of the approximately 294,000 full-service restaurants in the US will offer outdoor service, an estimated 112,000 restaurants will need patio heating capabilities.
A typical full-size propane patio heater has a capacity of approximately 40,000 BTU/hr and will provide heat to approximately 300 square feet. Assuming a modest two heaters per restaurant, running for an average of five hours a day, propane patio heaters could add an additional 11,657 barrels of propane demand per day, a 1% increase over current demand levels. Over the remainder of the year, that would add 1.3 MMbbls, just under a full day’s worth of US production (1.5 MMb/d in August 2020).
So maybe propane patio heaters won’t lead to a huge surge in propane demand. If nothing else, the increased use of patio heating might be just the thing to spur college football fans to visit their local bar to watch their favorite team fail to meet expectations, for another season. And isn’t that what college football is all about? For those looking for a more in-depth analysis of US NGL markets, request a sample of our Upstream Outlook which contains our monthly NGL production forecasts across all US production regions.