NGL prices rose to begin the year, natural gas prices continued to fall and margins continued to widen, i.e., a comfort food kind of week for the frac spread.

The chicken casserole (deemed most comforting by Southern Living) equivalent was Mont Belvieu, Texas, ethane, which rose by 2.8% but saw its margin almost double since the close of 2018 to nearly 9 cents per gallon. Demand is up as ethylene plants return to operations following outages, EnVantage Inc. analysts wrote in a report.

Ethane is also competing well globally as an ethylene feedstock despite lower crude oil prices, which would be expected to push demand for naphtha. From that perspective, things look pretty good.

“Ethane exports on the Gulf Coast increased 38% in December from November levels and January exports could be on the same pace,” EnVantage said.

In spite of ethane’s tumbling price, it is still 17.9% ahead of where it was in 2018 at this time and its margin has tripled. Compare that to the hypothetical Mont Belvieu NGL barrel, the kale-soaked-in-cod-liver-oil of comfort foods, that took a 24.2% 12-month hit in price and 40% hit in margin.

Since this time last year, fortunes of the other NGL have declined sharply:

  • Propane: price down 34%, margin down 51%;
  • Butane: price down 24.4%, margin down 46%;
  • Isobutane: price down 24.5%, margin down 41%; and
  • Natural gasoline: price down 29.1%, margin down 39%.

Propane, in particular, is developing an outlook closer to Puffin Hearts (it’s a thing; Google it) than mac and cheese.

“Although it would appear that propane balances are in a very manageable position on the Gulf Coast and in the Midcontinent going into 2019, we feel that U.S. propane balances will be oversupplied compared to 2018 levels as January gets underway,” said EnVantage. “Last January, U.S. propane stocks dropped 17 million barrels and it is very unlikely a drop of that magnitude will happen this January due to the likelihood of warmer than normal weather for the month.”

In the week ended Jan. 4, storage of natural gas in the Lower 48 experienced a decrease of 91 billion cubic feet (Bcf), the U.S. Energy Information Administration reported, compared to the Bloomberg consensus prediction of a 64 Bcf withdrawal and the Stratas Advisors expectation of a 28 Bcf withdrawal. The figure resulted in a total of 2.614 trillion cubic feet (Tcf). That is 7.2% below the 2.818 Tcf figure at the same time in 2018 and 15.1% below the five-year average of 3.078 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.

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