Current demand levels for NGL are flat, but market dynamics support price improvements in the near-term. Both ethane cracking and petrochemical capacity are expected to increase shortly as plant turnarounds and expansions are nearing completion.

The average prices for NGL in May were down across the board at both hubs, aside from Conway E-P mix and isobutane, as the shoulder season was especially weak for demand this season due to the facility turnarounds.

Ethane cracking capacity increased to nearly 1.1 million barrels per day (MMbbl/d) and is expected to increase to 1.2 MMbbl/b by July. Limited demand caused ethane to trade in step with gas prices, but once this cracking capacity is added, prices should separate with ethane possibly approaching 50 cents per gallon (/gal) by the fall.

Prices for ethane were static at both hubs the week of May 28 with the Conway price down 2% to 27 cents/gal and the Mont Belvieu price up 1% to 30 cents/gal, its highest in a little over a month. However, margins weakened as gas prices experienced solid gains when cooling demand increased. Mont Belvieu gas prices rose 9% to $4.68 per million Btu (/MMBtu) with Conway prices not far behind at $4.60/MMBtu following a 7% increase.

Propane prices were also nearly identical to the prior week as petrochemical plants are in the midst of turnarounds that are expected to end shortly. Prices have been supported by the market’s willingness to reload inventories ahead of the upcoming winter after stocks were drastically reduced from this past winter’s bitterly cold temperatures. The one possible headwind that could impact prices on a short-term basis is the possibility that Enterprise Products Partners LP may be taking its LPG export terminal along the Houston Ship Channel into a quick two-week turnaround at the end of June. It is unlikely that such action would have any sort of long-term impact on propane prices, but more information regarding that may be available next week.

Heavy NGL prices were a mixed bag with Mont Belvieu butane and isobutane prices trending upwards despite a downturn in WTI crude prices. Conway prices followed this crude price downturn with only butane prices experiencing any gains.

Conway isobutane prices fell 6% to $1.73/gal, their lowest price in a month, but are still trading at a hefty 41 cents/gal premium compared to the Mont Belvieu price. We’ve speculated that this was because of ONEOK’s isomerization unit in the region being offline, but demand in the region may also be increasing because of an expansion at BP’s Whiting, Ind., refinery, according to En*Vantage. This would explain the longer time that the premium has been in place. Since February, the Conway price of isobutane has consistently outpaced its Mont Belvieu counterpart. However, volatility still remains low at the hub.

The theoretical NGL bbl price was flat at both hubs as the Conway price was down 1% to $42.19/bbl with a 6% decrease in margin to $25.38/bbl. The Mont Belvieu price experienced a very small increase to $41.95/bbl with a 5% drop in margin to $24.85/bbl.

The most profitable NGL to make at both hubs was C5+ at $1.65/gal at Conway and $1.68/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.27/gal at Conway and 86 cents/gal at Mont Belvieu; butane at 73 cents/gal at Conway and 75 cents/gal at Mont Belvieu; propane at 60 cents/gal at Conway and 62 cents/gal at Mont Belvieu; and ethane at negative 4 cents/gal at Conway and negative 2 cents/gal at Mont Belvieu.

Natural gas storage levels posted another week of strong injection levels of the season the week of May 30, as the EIA reported that they increased 119 billion cubic feet to 1.499 trillion cubic feet (Tcf) from 1.38 Tcf the previous week. This was 33% below the 2.236 Tcf level reported last year at the same time and 37% below the five-year average of 2.395 Tcf. Injection levels have been greater than the five-year average injections for six consecutive weeks, although it is still touch and go whether storage levels will be able to fully reload in time for winter.

Injections should remain strong the week of June 11 as the National Weather Service is forecasting slightly warmer-than-normal temperatures along the East Coast and the Southwest. However, the rest of the country is expected to experience normal late-spring temperatures.

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