Despite cold temperatures and heavy snow in parts of the country, natural gas liquid (NGL) prices largely fell at both Mont Belvieu and Conway the first week of March as the propane supply shortage from earlier this year has since caught up with demand.
However, the same could not be said of natural gas as prices rose by more than 50% from the previous week to just under $8 per million British thermal unit. These prices will be short-lived as they are highly dependent on heating demand. In fact, April forward prices are trending lower as spring temperatures are expected and the start of the storage injection season will mean that there won’t be a shortfall this year.
Although temperatures didn’t approach the lows experienced during the polar vortex events earlier this year, prices were at their strongest this past week. This caused frac spread margins to take downturns across the board.
The largest drop was for ethane. Prices fell because there is still a large amount of rejection taking place around the country. Much of this year has seen ethane prices strongly correlate with gas prices, but the sharp spike in gas prices resulted in the obliteration of this connection.
The Mont Belvieu price dropped 14% to 34 cents per gallon, its lowest price since the week of January 8 when it was 29 cents per gallon. The Conway price fell 4% to 34 cents per gallon, which was its second-highest price in nearly two years. This relative strength was further evidenced by the fact that prices were even at the two hubs.
While not as weak as ethane, propane also faced headwinds this week with the price dropping 15% to $1.10 per gallon at Mont Belvieu and 14% to $1.14 per gallon at Conway. Margins fell by more than 50% at both hubs. These decreases were due to prices rebalancing after the extreme run-up of the previous month.
Butane and isobutane prices fell at both hubs, but it appears that the bottom may have been hit or is quickly approaching as these decreases weren’t as pronounced as the two lighter NGLs, propane and ethane. Both butane and isobutane decreased 4% at Mont Belvieu, falling to $1.26 per gallon and $1.34 per gallon respectively. Midcontinent prices fell at a slightly smaller pace with butane down 2% to $1.22 per gallon and isobutane down 3% to $1.37 per gallon at Conway. Both sets of prices were by far the lowest this year.
Pentanes-plus (C5+) was the lone NGL to experience an uptick in value this week as prices kept pace with crude prices, which also rose this week. According to Hart Energy’s Energy Commodities Report for March 6, “Increased tensions between Russia and Ukraine drove crude oil futures to their highest close in more than five months on March 3, with prices settling near $105 per barrel (bbl.) amid fears of disruptions to global oil supplies.”
On the back of this news, C5+ prices rose 1% to $2.15 per gallon at Mont Belvieu and 2% to $2.27 per gallon at Conway. This was the highest price in the Midcontinent since the week of February 20, 2013, when it was $2.30 per gallon. The Mont Belvieu price was the highest since it was the same price the week of December 18, 2013.
The theoretical NGL bbl. fell at both hubs with the Conway price down 5% to $44.53 per bbl.—a staggering 43% drop in margin to $15.96 per bbl. The Mont Belvieu price tumbled 7% to $43.09 per bbl. with a 50% drop in margin to $14.19 per bbl.
The most profitable NGL at both hubs was C5+ at $1.40 per gallon at Conway and $1.27 per gallon at Mont Belvieu. This was followed, in order, by isobutane at 59 cents per gallon at Conway and 55 cents per gallon at Mont Belvieu; propane at 42 cents per gallon at Conway and butane at 44 cents per gallon at Mont Belvieu; butane at 41 cents per gallon at Conway and propane at 38 cents per gallon at Mont Belvieu; and ethane at negative 18 cents per gallon at Conway and negative 19 cents per gallon at Mont Belvieu.
Natural gas storage levels fell by 152 billion cubic feet to 1.196 trillion cubic feet (Tcf) the week of February 28, according to the most recent data available from the Energy Information Administration, from 1.348 Tcf the previous week. This was 43% below the 2.104 Tcf reported last year at the same time and 39% below the five-year average of 1.954 Tcf.
There could be another late push-up in gas prices the week of March 10 as the National Weather Service is forecasting colder-than-normal weather for the Midwest and East Coast. This will be slightly tempered by warmer-than-normal temperatures along the West Coast.
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