The ethane price at Mont Belvieu, Texas, jumped 12.4% in the last week and the hypothetical NGL barrel was up almost 3%, with margins improving for both.

Of course, ethane’s price was still the second-lowest since 2005 and the barrel’s was the third-lowest year-to-date, but a rally is a rally. Enjoy the moment.

Because it doesn’t look like things are getting better. EnVantage Inc. forecast that NGL storage on the Gulf Coast would begin to exceed capacity beginning in July. However, the July U.S. Energy Information Administration (EIA) storage report showed a 48% increase in volume compared to May 2018.

frac spreadStorage capacity constraints on the Gulf Coast are largely responsible for the severe drop in NGL prices, the analysts said, and the May-to-May comparison bears that out. Mont Belvieu’s hypothetical barrel was down 33% in May compared to May 2018. Ethane’s drop was 22%; propane was down 37%; normal butane, 40%; isobutane, 52%; and pentanes-plus, 23%.

EnVantage expects the price contango—in which the futures price of a commodity is higher than the spot price—to steepen as storage capacity becomes more constrained.

“Consequently,” the analysts wrote, “at the beginning of each month NGL prices could pop up only to fall back as the month progresses.”

NGL prices

NGL are not the only commodities falling into the “boy, we sure do have a lot of this stuff” category. Crude oil again defied analyst expectations of a weekly storage withdrawal with a 2.4 million barrel increase. West Texas Intermediate (WTI) crude lost $1.28 per barrel on Aug. 7, or about 2.3%.

Global tensions that would typically be propelling oil prices skyward are being countered by trader fears of too much oil produced for a slowing global economy that doesn’t need that much. That’s a lot of fear, considering this disturbing list from Richard Haass, president of the Council on Foreign Relations and author of “The World In Disarray”:

  • U.S.-China trade war;
  • Hottest July ever;
  • Hong Kong on the edge;
  • Odds of U.S.-Iran, Turkish-Kurdish conflicts mounting;
  • New India-Pakistan Kashmir crisis;
  • Japan-South Korea diplomatic/economic confrontation; and
  • Looming Brexit.

Forgive him for not including the daily catastrophe that is Venezuela.

EnVantage sees oil prices as vulnerable.

“Absent a major disruption of oil flows in the Middle East, the chances for WTI prices to drop below $55 become greater, despite our forecast that U.S. crude oil inventories should continue to decline in August,” the analysts wrote.

Resin pricesIn the week ended Aug. 2, storage of natural gas in the Lower 48 experienced an increase of 55 billion cubic feet (Bcf), the Energy Information Administration (EIA) reported. Meanwhile, Stratas Advisors expected a 60 Bcf build and the Bloomberg consensus was 59 Bcf. The EIA figure resulted in a total of 2.689 trillion cubic feet (Tcf). That is 14.6% above the 2.346 Tcf figure at the same time in 2018 and 4% below the five-year average of 2.8 Tcf.

Technical issues with Hart Energy’s data provider do not allow us to provide the price of ethane from Conway, Kan., for the last week of March because of a loss of pricing data for that time period. For the same reason, we cannot compare the price of the hypothetical Conway NGL barrel to the previous week. Conway ethane prices are not available for March 2019 and first-quarter 2019. We apologize for the inconvenience.

Contact Joseph Markman at jmarkman@hartenergy.com. Twitter handle: @JHMarkman.

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