It appears as though any recoupling that took place between crude oil and NGL prices in the past year was a coincidence more than a return to the old form of normalcy, given the decoupling between the two that took place as the first half ended.
While West Texas Intermediate (WTI) crude has been trading at an average of $60 per barrel (bbl) recently, NGL prices lost nearly 10% in value at the Conway, Kan., and Mont Belvieu, Texas, trad ing hubs. Interestingly, there is more evidence to suggest that prices should recouple on the downward cycle—more than a further widening of the delta between the two markets.
NGL prices are expected to continue to face headwinds throughout the rest of the summer with the possible exception of ethane, which may begin to see improvements. The biggest headwind facing the NGL market is the large storage build for most liquids with ethane being the only product that can reasonably anticipate a tightening of volumes in the near term. This situation has caused most NGL prices to hit their lowest level in nearly a decade.
The global crude market is also oversupplied, but prices have been improving. However, prices may reverse as the market reacts to the large storage levels for crude.
The oil glut hasn’t sufficiently cleared and instead only shifted geography, according to a re- cent Barclays Capital research note. Additionally North American balances have been supported by very few remaining runs, declining output from the Bakken, wildfires in Canada and synthetic crude oil maintenance.
The story is starker for NGL prices, especially for propane, which hit 14-year lows at both Mont Belvieu and Conway. While margins remain positive, the Midcontinent frac spread is very thin. There is a silver lining, though, and that’s the fact that storage builds have been lower than expected the past few weeks as LPG exports grow.
Although propane prices are heading down a similar path that ethane took three years ago, the hope is that they won’t stay at this level for as long as ethane prices. Unlike ethane, propane has multiple outlets: petrochemical, heating and commercial. Ethane only has the North American petrochemical market as a demand center with exports coming on soon.
This isn’t to say that there will be a quick turn-around in the propane market. Short of another polar vortex this winter, prices are likely to improve on an incremental basis as the large storage levels are worked off. It is possible that propane burning will help restore balance in much the same way that ethane rejection is beginning to restore that market.

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