NGL prices continued to falter the week of May 7 with only Conway E-P mix and isobutane experiencing improvements at either hub. However, neither of these increases were major upticks as the NGL market remained firm during this shoulder season.

The Conway isobutane price increased 3% to $1.70 per gallon (/gal), but this was with limited volatility and is 16 cents/gal off the 18-month high price from two weeks prior. Shortages in the market have subsided, but prices rebounded slightly from their large decline the previous week. There may be more demand for isobutane at Mont Belvieu, as evidenced by stronger volatility, but the product’s price is much weaker at $1.25/gal. This was the lowest price at the hub since last July as the switch to summer-grade gasoline is limiting its demand.

Ethane held firm at Mont Belvieu with a 1% decrease to 29 cents/gal, the ninth straight week it has been in this range. The Conway price for ethane, which is traded as E-P mix at the hub, increased 1% to 27 cents/gal. These prices are actually fairly stronger when all things are considered. Ethane is still in widespread rejection throughout the country, ethane cracking capacity is limited with several important facilities down for maintenance, and there is no export demand for the product until Enterprise Products Partners LP’s export terminal comes online next year.

Propane prices are, as expected, well off their yearly high due to no seasonal demand for the product. The Mont Belvieu price fell 3% to $1.04/gal and the Conway price decreased 3% to $1.02/gal. It is still somewhat surprising just how far they are falling given the amount of LPG export capacity now along the Gulf Coast. Somewhat more surprising is the fact that inventory levels are rising at the same time without a price increase. There is still concern over the industry’s ability to reload propane stocks ahead of this coming winter, but thus far producers are responding admirably at meeting both domestic storage and foreign export markets.

Rather than buyers bidding up propane prices, En*Vantage reported that some of the PADD II storage build is a result of the Cochin pipeline reversal. “Kinder Morgan is in the process of draining that line of the line-fill in order to fill with C5+ once the reversal is complete. We estimate that the Cochin line-fill is approximately 1.3 million barrels (bbl) and it is possible this is contributing to the inventory builds in PADD II,” the firm said in its May 8 Weekly Energy Report.

The overall theoretical NGL bbl price fell 2% with the Mont Belvieu price down to $41.35/bbl with a 1% increase in margin to $25.53/bbl while the Conway price dropped to $41.77/bbl with a 1% gain in margin to $25.92/bbl.

The most profitable NGL to make at both hubs was C5+ at $1.71/gal at Mont Belvieu and $1.66/gal at Conway. This was followed, in order, by isobutane at 82 cents/gal at Mont Belvieu and $1.26/gal at Conway; butane at 76 cents/gal at Mont Belvieu and 72 cents/gal at Conway; propane at 65 cents/gal at Mont Belvieu and 63 cents/gal at Conway; and ethane at nil at Mont Belvieu and negative 2 cents/gal at Conway.

The natural gas storage injection for May 9, the most recent data available from the Energy Information Administration, was greater than many analysts anticipated as it rose by 105 billion cubic feet to 1.160 trillion cubic feet (Tcf) from 1.055 Tcf. This was 41% below the 1.950 Tcf posted last year at the same time and 45% below the five-year average of 2.119 Tcf.

Storage levels may approach a similar level this coming week as the National Weather Service’s forecast for the week of May 21 anticipates normal late spring temperatures in the Northeast and much of the Midwest. The Southeast and West Coast may have increased cooling demand based on hotter-than-normal temperature expectations.

The unexpected increase in storage injection levels resulted in a 6% discount for gas prices at both hubs with the Mont Belvieu price falling to $4.33 per million Btu (/MMBtu) and the Conway price down to $4.34/MMBtu. According to Barclays Capital, the increased injection levels are also having an impact on forward prices. “This is the third week in a row that injections have come above consensus expectations. Indeed, the prompt contract tumbled and dropped by 13 cents as of May 8, down almost 3% on the week,” the firm said in an Energy Market Outlook research note. “Calendars 2015 and 2016 came off by 1.5% and 1%, respectively week-on-week.”

The firm anticipates that the storage deficit compared to last year will be about 400 Tcf by the end of October. However, the note also held for the possibility that this outlook was under risk if the Southeast continued to experience warmer-than-normal weather. The region represents the country’s greatest displacement of coal-fired power generation and the difficulty in storing cheaper coal or securing it quickly would force power plants to burn more gas during the summer. Should the U.S. experience normal summer and winter temperatures it is likely that the country will be able to weather the storage deficit, but another summer like 2011 or a winter like 2014 would result in higher gas prices.

Comments