West Texas Intermediate crude prices improved despite record stock levels as the U.S. Energy Information Administration reported that production fell to its lowest level since 2014 the final week of February. The improvement to just under $35 per barrel (/bbl) was supported by continued discussions to freeze current production levels among various oil producing countries.

While these talks are helping support a modestly bearish sentiment among traders, Barclays Capital said that these talks are unlikely to have any immediate impact on market balances since the producers involved in the talks are already producing near full capacity.

“We think what it does represent, however, is an exercise in building broader cooperation between producers, and thereby is likely to prove a litmus test for building trust…Over the coming months, this trust will be put to the test. We still view a coordinated effort as challenging but believe the likelihood has certainly increased,” the investment firm said in a Feb. 29 research note. Barclays Capital added that the action does not represent a bullish signal for the first quarter, but rather a slow grind in prices over the quarter.

The improvement in crude helped C5+ prices reach their highest prices at Mont Belvieu and Conway since the first week of 2016. The Conway price rose 7% to 75 cents per gallon (/gal) while the Mont Belvieu price improved 9% to the same price.

The other two heavy NGL products – butane and isobutane – experienced price declines as refiners switch from winter-grade gasoline to summer-grade gasoline. Butane was down 2% (53 cents/gal) at Mont Belvieu and 1% (48 cents/gal) at Conway, while isobutane fell 1% (54 cents/gal) at Mont Belvieu and 3% (58 cents/gal) at Conway.

Light NGL prices were a mixed bag as propane continued to make strides with an unexpectedly larger decline in inventory levels due to strong export demand. The price improved 8% to 41 cents/gal at Mont Belvieu and 10% to 37 cents/gal at Conway. Both prices were the highest at their hubs since early December 2015.

As much strength as the propane market has been showing of late, the ethane market has experienced weakness during the same time as the Mont Belvieu price fell 3% to 14 cents/gal and the Conway price was down 14% to 11 cents/gal. These prices are among the lowest in the past two years, but margins remain positive due to weaker gas prices. Natural gas prices were down to about $1.50 per million Btu at both hubs as the mild winter failed to work off enough of the storage overhang prior to the spring shoulder season.

Overall the theoretical NGL bbl price rose 2% to $15.37/bbl with a 10% gain in margin to $10/bbl at Conway. The Mont Belvieu price improved 4% to $16.43/bbl with a 15% gain in margin to $10.91/bbl.

The most profitable NGL to make at both hubs was C5+ at 59 cents/gal at both hubs. This was followed, in order, by isobutane at 44 cents/gal at Conway and 39 cents/gal at Mont Belvieu; butane at 33 cents/gal at Conway and 38 cents/gal at Mont Belvieu; propane at 24 cents/gal at Conway and 28 cents/gal at Mont Belvieu; and ethane at 1 cent/gal at Conway and 4 cents/gal at Mont Belvieu.

Frank Nieto can be reached at fnieto@hartenergy.com.

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