NGL prices continued to trend downward the first week of May as the combination of a natural price downturn related to the shoulder season combined with several ethylene plants that went down for unscheduled maintenance.

Nearly 20% of the U.S. ethane cracking capacity is down for maintenance with Westlake Chemical Corp.’s Lake Charles #1 and both of Dow Chemical Co.’s crackers at Plaquemine, La., down. These joined the planned outages at Equistar Chemicals LP’s LaPorte, Texas, Exxon Mobil Corp.’s Beaumont, Texas, and DuPont Co.’s Orange, Texas, plants as well as the continued maintenance work at Williams Cos.’ Geismar, La., plant.

The good news is that the shoulder season is drawing to a close and cooling demand should start to pick up shortly. While the unplanned outages are a major short-term headwind, several major crackers are scheduled to come back online in June. In addition, several of the crackers undergoing unplanned outages are expected to be back in service within two weeks.

There was an immediate impact on Mont Belvieu ethane prices, as they fell 2% to 29 cents per gallon (/gal). While this was the lowest price at the hub in five weeks, it wasn’t too far out of the zone that ethane has been trading at the hub since mid-February. Conway ethane prices actually improved 3% to 26 cents/gal, their highest level in a month.

Although it is tempting to credit this improvement to the fact it trades as E-P mix at the hub, it isn’t quite that simple as propane prices fell another 3% at the hub. In all likelihood ethane prices have plateaued and short of major long-term swings—both positive and negative—it is unlikely they will experience much movement for the short-term. It is still expected that ethane prices will experience a turnaround in the third quarter when the country reaches full cracking capacity, along with increased capacity from expansions, for the first time in more than a year.

Propane prices fell 3% at both hubs to their lowest levels in a month. The Mont Belvieu price fell to $1.07/gal and the Conway price decreased to $1.06/gal. Despite this price slowdown, inventory continues to build at PADD II and PADD III. Inventory in the Midcontinent stood at nearly 12 million barrels (bbl) on May 2, just below the same level at PADD II last year at the same time. Gulf Coast inventories rose by 2 million bbl to 19 million bbl, but this was 7 million bbl below last year’s level. While propane balances may be tighter this winter, unless there is excessive heating demand the market will likely be able to meet normal demand levels.

Heavy NGL prices fell due to stagnant demand despite slightly improved crude prices. The biggest downturn was for Conway isobutane as the price spike rapidly declines because there is no longer a shortage of supplies in the region. The price fell 11% to $1.65/gal, its lowest price since it was $1.64/gal the week of April 9. Prices had fallen below $1.60/gal by the end of the week. The Mont Belvieu price held firm at $1.28/gal. Alkylation demand is increasing, which should help isobutane prices in the coming weeks.

The theoretical NGL bbl fell 3% in value at both hubs with the Conway price dropping to $42.44/bbl with a 5% drop in margin to $25.64/bbl. The Mont Belvieu price decreased to $42.07/bbl with a 3% drop decrease in margin to $25.26/bbl.

Natural gas prices also decreased at both hubs, falling to $4.60 per million Btu , but the outlook remains solid as the continued focus on wet gas production is helping to work off the overhang. According to the Energy Information Administration (EIA), liquids extracted from wet gas at processing plants represented 5.2% of the volume of marketed production in 2013. This was up from a low of 4.5% in 2008.

Stable gas prices are having a noticeable impact on frac spread margins with margins down across the board at both hubs, aside from ethane, which remains negative at both Conway and Mont Belvieu.

The most profitable NGL to make at both hubs was C5+ at $1.68/gal at Conway and $1.69/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.19/gal at Conway and 82 cents/gal at Mont Belvieu; butane at 72 cents/gal at Conway and 76 cents/gal at Mont Belvieu; propane at 63 cents/gal at Conway and 65 cents/gal at Mont Belvieu; and ethane at negative 4 cents/gal at Conway and negative 1 cent/gal at Mont Belvieu.

Natural gas storage levels increased near the bottom average for injection levels during this time of year, but surpassed 1 trillion cubic feet (Tcf) for the first time this season. According to the EIA’s most recent data, storage rose 74 billion cubic feet (Bcf) to 1.055 Tcf the week of May 2 from 981 Bcf the previous week. This was 43% below the 1.852 Tcf posted last year at the same time and 48% below the five-year average of 2.037 Tcf.

Cooling demand is expected to remain limited according to the National Weather Service’s forecast for next week which anticipates cooler-than-normal weather throughout much of the Midwest. Only the most eastern of the Eastern Seaboard and the West Coast are expected to experience warmer-than-normal temperatures this week.

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