Although crude stocks remain at record levels, prices continue to benefit moderately from the news that several oil producing countries are willing to freeze production as prices have held above $30 per barrel (/bbl). The fact that price level causes any sort of optimism tells the whole story of how far the market has slumped in the past 18-24 months.

In some ways this relative optimism is a case of the market reacting to perception over reality. A freeze in production is unlikely to having any tangible impact on the market unless it includes Iran and Iraq, which seems doubtful.

“The ‘freeze’ is attractive because it gives the semblance of coherent and credible policy-making, while allowing countries the ability to do what they were going to do anyway,” Barclays Capital said in a Feb. 22 research note.

Production is already at a high level so this agreement will only serve to somewhat mitigate the damage that Iraq and Iran’s return to the global market will do to prices. If Iran and/or Iraq were part of such an agreement then there would be the potential for equilibrium in the market. So far Iran has said the right things about supporting any efforts to stabilize the market, but added they would not participate in a freeze because they’ve been out of the widespread global market for some time.

Officials contend that Iran didn’t cause the oversupplied market and shouldn’t unduly suffer from it just as they return to the market. Barclays stated it was possible Iran could participate in such actions in a few months once it re-establishes trade flows.

However, the investment noted that there could be further cuts coming based on past precedent. “Production cuts have been arranged in the past in a step-by-step process. When they have been successful, cuts have come in the face of demand-side challenges, similar to the demand challenges today,” the research note said.

While it was a good sign to see Saudi Arabia listed as a possible participant, officials from the country’s oil ministry quickly scuttled this talk this week by commenting that they had no intention of cutting production and were prepared to let prices fall to $20/bbl.

“Basically, Saudi Arabia is prepared to use low prices as a weapon to weaken Iran and Russia, even if it causes collateral damage for U.S. shale and Canadian oil sand producers and for their fellow OPEC members,” En*Vantage said in its Feb. 25 Weekly Energy Report.

While crude prices have ticked upwards in recent weeks, the opposite is true of natural gas as prices continue to trend towards $1.50 per million Btu (/MMBtu) at both the Conway, KS, and Mont Belvieu, Texas, hubs as the realization that winter could not solve the storage overhang has come to fruition. Indeed, as winter is drawing to a close, the storage level is above the five-year average just as the shoulder season is set to begin.

Lower gas prices also dragged ethane prices down as they fell 6% at Conway to 13 cents per gallon (/gal), the lowest it has been this year. Similarly the Mont Belvieu fell 4% to 15 cents/gal, its lowest price since mid-January.

In a bit of a surprise the NGL with the most positive story to tell has been propane, which has been gaining in value as storage levels have rapidly declined in just two months. At the beginning of 2016, propane stocks stood at nearly 22 million bbl and had dropped to just under 9 million bbl by Feb. 19.

This unexpected decline is attributed to high export levels, which increased by nearly 200,000 bbl/d in the first quarter of 2016 from quarter four 2015. Much of these new exports are due to Enterprise Products Partners LP’s propane export terminal coming online along the Houston Ship Channel. Of course, as with most positive news in this down cycle there has been a caveat attached.

“The irony of it all…is that as exports increased and propane stocks declined increasing Mont Belvieu propane prices, export arbs from the Gulf Coast to Europe and Asia have narrowed significantly and are at levels not covering loading and transportation fees, even though shipping costs have fallen 68% from last year’s peaks,” En*Vantage said.

The company stated that while contract cargo cancellations would have been expected under these circumstances, they are likely not being cancelled because of terms that would voice their dock space. If this situation holds up and propane storage is more balanced it could lead to a quicker than anticipated price recovery.

The uptick in crude prices pulled heavy NGL prices up, which when combined with the improvement in propane, saw the theoretical NGL bbl increase at both hubs. The Conway price was up 2% to $15.04/bbl with a 4% increase in margin to $9.09/bbl while the Mont Belvieu price rose 4% to $15.77/bbl with an 11% increase in margin to $9.52/bbl.

The most profitable NGL to make at both hubs was C5+ at 52 cents/gal at Conway and 50 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 44 cents/gal at Conway and 37 cents/gal at Mont Belvieu; butane at 32 cents/gal at Conway and 37 cents/gal at Mont Belvieu; propane at 19 cents/gal at Conway and 22 cents/gal at Mont Belvieu; and ethane at 2 cents/gal at Conway and 3 cents/gal at Mont Belvieu.

Natural gas storage levels fell by 117 billion cubic feet to 2.584 trillion cubic feet (Tcf) the week of Feb. 19 from 2.701 Tcf the previous week according to the most recent data from the U.S. Energy Information Administration. This was 31% greater than the 1.969 Tcf posted last year at the same time and 29% greater than the five-year average of 2.007 Tcf.

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