ONEOK’s isomerzation unit in Conway returned to full operations the week of September 19, which resulted in prices taking a 16% drop to $1.63 per gallon (/gal) at the hub.
The Mont Belvieu price also fell the week of September 19, as it was down 3% to $1.72/gal. This marked the first time since the first week of August that the Mont Belvieu price was greater than its Conway counterpart.
In fact, only one NGL experienced a price gain this week as Conway E-P mix improved 7% to 16¢/gal. However, this price was the second lowest at the hub in the past seven weeks as Conway E-P mix remains very much under pressure. Mont Belvieu ethane prices were down very slightly to 30¢/gal. The frac spread margins at both hubs were down compared to the previous week with the Mont Belvieu margin down 5%, pushing them to the brink of just being theoretically positive. The Conway margin took a 24% downturn with the margin at a negative 3¢/gal.
It is unlikely that there will be a major improvement for ethane prices and margins for the next few months. “Ethane prices continued to be affected by high inventories, current ethylene plant outages, the impending turnarounds in October and falling crude prices,” En*Vantage said in its Weekly Energy Report.
The shoulder season combined with a decrease in propane exports and stagnant crude prices resulted in propane prices tumbling at both hubs. The Mont Belvieu price fell 4% to 87¢/gal, its lowest price since the week of August 22 when it was 84¢/gal. The Conway price was down 6% to 75¢/gal, its lowest price since the week of August 1 when it was 62¢/gal.
While NGL prices were largely down the week of September 19, natural gas prices showed improvements at both hubs. The Conway price rose 2% to $2.77 per million Btu (/MMBtu) while the Mont Belvieu price increased 3% to $2.87/MMBtu.
Looking forward to the winter season, Barclays Capital stated in its September 25 Gas and Power Kaleidoscope that there is more downside than upside potential for gas prices.
“The winter contracts, in our view, are over valued with the January contact trading above $3.50/MMBtu. Even under the assumption that the forthcoming winter weather will return to normal, we believe that the market still needs a large amount of coal displacement in the Eastern power markets to avoid last year’s end-of-withdrawal season storage turmoil. This means that prices need to average around the low-$3 range rather than decidedly in the mid-$3s,” the report said.
Improved natural gas prices and lower NGL prices saw margins tumble at both hubs. The most profitable NGL to make at both hubs remained C5+ at $1.63/gal at Conway and $1.68/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.35/gal at Conway and $1.44/gal at Mont Belvieu; butane at $1.07/gal at Conway and $1.18/gal at Mont Belvieu; propane at 50¢/gal at Conway and 61¢/gal at Mont Belvieu; and ethane at negative 3¢/gal at Conway and 11¢/gal at Mont Belvieu.
The theoretical NGL barrel price also decreased at both hubs, with the Conway price down 7% to $36.14 per barrel (bbl.) with a 10% drop in margin to $26.02 per bbl. The Mont Belvieu price was down 4% to $40.88 per bbl. with a 7% to $30.40 per bbl.
Natural gas in storage for the week of September 21 rose 80 billion cubic feet (Bcf) to 3.576 trillion cubic feet (Tcf) from 3.496 Tcf the previous week according to the Energy Information Administration. This was 9% greater than the 3.280 Tcf storage figure reported last year at the same and the five-year average of 3.294 Tcf.
Though the cooling season has typically ended by October, the National Weather Service’s forecast for next week is calling for much warmer than normal temperatures along the East Coast and parts of the West and Gulf coasts. These temperatures should see a greater than normal use of electricity, increasing demand for natural gas.
Data Provided by Intercontinental Exchange. Individual product prices in
cents per gallon. NGL barrel in $/42 gallons | Source: Frank Nieto
Price, Shrink of 42-gal NGL barrel based on following: Ethane, 36.5%; Propane, 31.8%; Normal Butane, 11.2%; Isobutane, 6.2%; Pentane+, 14.3%, Fuel, frac, transport costs not included. Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel. Shrink is defined as Btus that are removed from natural gas through the gathering and processing operation. Source: Frank Nieto
Contact the author, Frank Nieto, at fnieto@hartenergy.com
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