Ethane was the lone natural gas liquid (NGL) to experience a price downturn throughout the month of October as the market remained overextended due to the fact that three ethane crackers were offline in the Gulf Coast during the month.
The Mont Belvieu price was relatively stable throughout the month at 31¢ per gallon (/gal), but the Conway price decreased 1¢/gal to 19¢/gal as the month came to an end. Although these price decreases weren’t excessive, ethane frac spread margins took large hits due to an increase in natural gas prices at both hubs.
Natural gas prices improved 13% from the start of October at Conway to $3.48 per million Btu (/MMBtu) while the Mont Belvieu price rose 11% to $3.46/MMBtu. This pushed the ethane frac spread down 348% at Conway to negative 4¢/gal. The Mont Belvieu margin fell 26% to 9¢/gal.
Butane posted the strongest gains for any NGL in terms of price and margin as refiners continued to switch to winter-grade gasoline, which increased the Conway price to $1.61/gal and the Mont Belvieu price to $1.88/gal. This resulted in a 21% increase for the Conway margin and a 9% increase for the Mont Belvieu margin.
Pentanes-plus (C5+) prices had the second-largest gains in October despite the fact that crude prices traded below $90 per barrel (/bbl.) as the month came to a close. Improvements for C5+ prices were a further indication of the decoupling taking place between heavy NGLs and crude prices.
In the month of October, the theoretical NGL barrel price improved 9% to $41.24/bbl. with a 7% drop in margin to $28.52/bbl. at Conway. The Mont Belvieu bbl. price also improved 9% to $46.46/bbl. with a 9% gain in margin to $33.82/bbl.
The most profitable NGL to make at both hubs was C5+ at $1.82/gal at Conway and $2.01/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.39/gal at Conway and $1.54/gal at Mont Belvieu; butane at $1.25/gal at Conway and $1.27/gal at Mont Belvieu; propane at 53¢/gal at Conway and 68¢/gal at Mont Belvieu; and ethane at negative 4¢/gal at Conway and 9¢/gal at Mont Belvieu.
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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