The E-P mix continues to struggle at Conway as rejection levels are increasing at a rapid pace in the Midcontinent. Thus there has been very low volatility at the hub and the price of 18 cents per gallon was the lowest at the hub this year. This led to the product being the lone natural gas liquid (NGL) at either Conway or Mont Belvieu to experience a decrease in frac spread margin for the week of November 13 as it fell 14%.

The market for E-P mix at the hub is very small and with the Mont Belvieu market full, there isn’t a real outlet as there have been reports that the Cochin Pipeline has curtailed its shipments of E-P mix. When the pipeline began offering service to transport E-P mix from Conway to Sarnia, Canada last year it was a huge relief for the Midcontinent as Conway was inundated with the product. It appears that much of the contracted volumes to be shipped on the system have been transported, which is creating another flooding of E-P mix at Conway.

Although Mont Belvieu ethane and E-P mix prices have been on the low end of the spectrum this year, they have at least been steady with theoretically positive margins due to the Gulf Coast petrochemical end user market. This week ethane prices rose 2% to 25 cents per gallon at the hub, which resulted in a 69% improvement in margin when combined with the decrease in gas prices.

After a two-week price rally caused by a sustained cold front, gas prices dipped 1% at both hubs as temperatures turned mild in much of the country. The Mont Belvieu price was down to $3.50 per million Btu (MMBtu) while the Conway price dropped to $3.43 per MMBtu.

These prices are not that different than what gas has been trading at for much of 2013. According to the Energy Information Administration (EIA), this is because seasonal price variations are disappearing as there is more certainty over supply. In addition,

“Over the past four years, the spread between the natural gas price for delivery in February and for delivery in November has decreased from an average of 65 cents per MMBtu in October 2010 trading to an average of 24 cents in October 2013,” EIA said in a research note on November 20.

Propane storage levels are now nearly 6 million barrels (bbl.) below their five-year average as liquefied petroleum gas (LPG) exports have worked off the storage overhang. Somewhat surprisingly, the market was largely flat from last week despite this major positive. This is partially due to the aforementioned mild temperatures that have reduced heating demand, but also a reflection of the market reacting to the downturn in E-P mix prices. It should be noted that the price at both Conway and Mont Belvieu were the highest for the past 18 months.

While West Texas Intermediate (WTI) crude prices fell below $95 per bbl. this week, heavy natural gas liquid (NGL) prices improved as a result of high demand for LPG exports, refining demand and increased fractionation capacity.

The theoretical NGL bbl. price rose 1% at Conway to $42.45 per bbl. with a 2% increase in margin to $29.92 per bbl. and the Mont Belvieu price increased 2% to $43.71 per bbl. with a 2% improvement in margin to $30.92 per bbl.

The most profitable NGL to make at both hubs was C5+ at $1.64 per gallon at Conway and $1.71 per gallon at Mont Belvieu. This was followed, in order, by isobutane at $1.12 per gallon at Conway and $1.13 per gallon at Mont Belvieu; butane at $1.08 per gallon at both hubs; propane at 90 cents per gallon at Conway and 87 cents per gallon at Mont Belvieu; and ethane at negative 5 cents per gallon at Conway and 2 cents per gallon at Mont Belvieu.

Natural gas storage levels were down 45 billion cubic feet the week of November 15 to 3.789 trillion cubic feet (Tcf) from 3.834 Tcf, according to the most recent EIA data available. This was 2% below the figure of 3.878 Tcf posted last year at the same time and just about even with the five-year average of 3.774 Tcf.

There might be a larger withdrawal of natural gas next week as the National Weather Service is forecasting another cold front for much of the country that will be concentrated along the East Coast and extend into the Midwest, Gulf Coast and Southwest.

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