U.S. exports of propane shot up 41% in the first half of 2016 compared to the same period in 2015, with 10x the volume of petroleum products being shipped as crude oil, the U.S. Energy Information Administration (EIA) reported.

Propane constituted about 17% of total petroleum product exports, up from about 14% last year, making it the second-largest export in that category behind distillates. Almost all of the growth went to Asia and Oceania, with Japan leading the way by increasing its purchases by 131% to 159 thousand barrels per day (Mbbl/d). Exports to Panama, however, fell 83% to 7 Mbbl/d.

EIA suggested that reduced ship-to-ship transfer activity resulted in the dramatic changes in exports to Japan and Panama. Some transfers cite the location of the transfer but not the final destination of the cargo, so propane formerly reported as sent to Panama may have been eventually destined for Japan or another country in Asia.

Of course, propane exports have slumped since the mid-year, with cancellation of some cargoes scheduled to be shipped to Asia. While exports averaged about 800 Mbbl/d in the first half of 2016, August exports were closer to 550 Mbbl/d. New customers have been developed in South America and the Caribbean, but not enough to fully compensate for the loss of Asian customers, who have turned to cheaper product available from the Middle East.

Propane stocks have reached close to 100 MMbbl, which is unheard of for this time of year, Peter Fasullo, principal of En*Vantage, recently told the Morgan Stanley energy research team. Narrowing export spreads have hurt the sector, he said, with added shipping and terminal fees making it difficult for exporters to compete in Asia.

With exports struggling, the only thing that has propped up the price of propane has been the assumption by traders of a cold winter for 2016-2017. Even if that expectation becomes a reality, propane will still be dependent on exports, meaning that markets in Asia and Europe will have to experience cold winters as well to relieve pressure on spreads.

Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.