Ethane margins remained positive last week despite an increase in natural gas prices. As temperatures remain cold throughout the country, heating demand continues to rise and drive gas prices up.

The Mont Belvieu price for natural gas increased 4% to $3.25 per million Btu (/MMBtu) and the Conway price rose 5% to $3.27/MMBtu. While propane prices remained flat at both hubs, this came a week after prices posted strong gains due to high heating demand.

Despite the positive gains, Barclays Capital stated that the cold weather might have too late to make a significant dent in the storage level as there has been a decline in the forward curve.

“Shifting weather patterns have been the main driver of swinging natural gas prices over the past two weeks. Cash prices have dropped 37¢ since January 22 and have averaged $3.32 from the beginning of 2013. The forward curve came under pressure as well, as freezing temperatures moderated, with the balance of 2013 closing at $3.57/MMBtu and calendar 2014 at $4.03 on February 4. We believe that it is a little too late for cold weather for the rest of the winter to put a significant dent in storage unless natural gas production declines outside of temporary freeze-offs materialize earlier than expected,” the investment firm said in its Gas and Power Kaleidoscope for the week of February 5.

Overall Conway natural gas liquids (NGL) prices outpaced their Mont Belvieu counterparts on the strength of two products: ethane and C5+ due to tight inventories. Conway ethane increased 7% to 27¢ per gallon (/gal), its highest price since it was 31¢/gal the week of March 14, 2012. This increase was primarily due to a lot of volatility on January 31, which caused the price to increase to an average of 33¢/gal on the day. By the end of our weekly analysis on February 5, the price had fallen back to 25¢/gal.

Ethane storage levels in the Midcontinent are nearly 1 million barrels (bbl.) below their levels last year at the same time. This decrease is due to more pipeline capacity coming online that is transporting ethane to the Gulf Coast.

Conway C5+ increased 11% to $2.55/gal due to the continued strength of crude oil, which traded above $95 per bbl. (/bbl.) for the week. The Conway price was the highest it had been since $2.67/gal the week of July 30, 2008.

The largest price increases at Mont Belvieu were also for ethane and C5+. The price of ethane increased 3% to 26¢/gal, its highest it has been since it was 27¢/gal the week of November 21. Pentanes-plus (C5+) rose 1% at the hub to $2.34/gal, the highest it has been since it was $2.35/gal the week of April 25.

As a result of these sizable increases in ethane and C5+, the Conway NGL bbl. price rose 4% to $45.21/bbl. This put the overall Conway price above the Mont Belvieu price for the first time in a month. The Conway NGL bbl. margin increased 3% to $33.26/bbl. The Mont Belvieu NGL bbl. price was flat at $43.87/bbl. with a 1% decrease in margin to $32/bbl.

The most profitable NGL to make at both hubs was C5+ at $2.19/gal at Conway and $1.98/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.45/gal at Conway and $1.49/gal at Mont Belvieu; butane at $1.37/gal at Conway and $1.37/gal at Mont Belvieu; propane at 52¢/gal at Conway and 57¢/gal at Mont Belvieu; and ethane at 6¢/gal at Conway and 4¢/gal at Mont Belvieu.

Natural gas in storage for the week of February 1 was down 118 billion cubic feet to 2.684 trillion cubic feet (Tcf) from 2.802 Tcf. This was 8% lower than the 2.910 Tcf figure posted last year at the same time and 15% greater than the five-year average of 2.333 Tcf.

Storage levels should continue to experience large withdrawal rates as the National Weather Service’s forecast for this week the entire country experiencing colder than normal temperatures.

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