The Conway isobutane price spike came to an abrupt end the first week of June with a 14% loss in value that saw its premium over Mont Belvieu prices get slashed in half. Capacity in the region is returning, which is providing an outlet for the product.

Interestingly while demand was down at the hub due to the turnarounds at BP’s Whiting, Ind., refinery and ONEOK’s isomerization unit, the price has been bid up throughout much of this year in order to attract the limited volumes that were necessary for end-users from other hubs.

The Conway price lost 34 cents per gallon (/gal) from June 4 to June 10 and fell to an average of $1.48/gal for the week. This was its lowest weekly price since the last week of March, while the June 10 price of $1.29/gal was the lowest daily value since it was the same price on Sept. 10, 2013. The Mont Belvieu isobutane price tumbled 3% to $1.28/gal, its lowest price in a month as refining demand remains weak due to summer gasoline blending.

The rest of the theoretical NGL barrel (bbl) experienced minor price decreases due to challenging short-term market dynamics. However, both gas and crude prices experienced gains this week which further challenged frac spread margins.

Natural gas prices increased 1% to $4.72 per million Btu (/MMBtu) at Mont Belvieu while Conway prices decreased 1% to $4.55/MMBtu. The Henry Hub price was in between these prices with a 2% rise to $4.65/MMBtu.

For the past several weeks, gas futures prices increased early in the week before retreating after the release of the Energy Information Administration (EIA) gas storage report. “In what has become an increasingly familiar trend, early-week NYMEX’s upside momentum was arrested following another modestly higher-than-expected storage build,” PIRA Energy Group wrote in a research note.

The EIA reported that gas in storage rose by 107 billion cubic feet (Bcf) to 1.606 trillion cubic feet (Tcf) for the week of June 6 from 1.499 Tcf. This was 31% below the 2.333 Tcf posted last year at the same time and 35% below the five-year average of 2.483 Tcf.

In addition, the EIA outlook for storage levels for the start of the heating season in November increased by nearly 20 Bcf to 3.6 Tcf. This is about 200 Bcf lower than the storage level last November and should help calm utilities’ fears that the market will be short of gas this upcoming season.

Further relief can be gleaned from the EIA’s Short-Term Energy Outlook for June, which stated that U.S. crude production was at its highest level in any month for 26 years and is on track to reach its highest annual production level since 1972.

“U.S. oil and natural gas supplies are less vulnerable to disruptions if hurricanes temporarily shut-in some offshore production this summer, because of the increase in onshore oil and natural gas production in recent years,” the forecast said.

While gas and oil will be able to meet domestic demand, PIRA Energy Group stated that increased LPG exports will pose a challenge to domestic propane prices in the future. In the meantime, propane prices continued to decrease as they fell 3% at both hubs. The Conway price fell to $1.00 per gallon (/gal), their lowest price in a month. The Mont Belvieu was $1.01/gal, their lowest level since they held the same price the week of Aug. 7, 2013. It is possible that storage levels could be rebuilt during the summer ahead of the propane demand season if prices remain this low.

These low prices helped to push the theoretical NGL bbl price down 3% at Conway to $40.92/bbl with a 4% decrease in margin to $24.30/bbl. The Mont Belvieu fared just marginally better as it was down 2% to $41.02/bbl with a 4% drop in margin to $23.77/bbl.

The most profitable NGL to make at both hubs was C5+ at $1.64/gal at Conway and Mont Belvieu. This was followed, in order, by isobutane at $1.03/gal at Conway and 81 cents/gal at Mont Belvieu; butane at 72 cents/gal at Conway and 73 cents/gal at Mont Belvieu; propane at 58 cents/gal at Conway and Mont Belvieu; and ethane at negative 4 cents/gal at Conway and negative 2 cents/gal at Mont Belvieu.

The National Weather service forecasts warmer-than-normal temperatures on the East Coast and most of the West Coast for the week of June 17, which should increase cooling demand. This will be somewhat tempered by expected cooler-than-normal temperatures in the Midwest.

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