There was more evidence of a floor having been set in the NGL market as prices rebounded from the losses experienced last week. This was despite being in the midst of the spring shoulder season when demand is among its lowest levels for the year.

The theoretical NGL barrel (bbl) gained 7% in value at the Conway, KS, hub as it rose to $17.82/bbl with a 14% gain in margin to $11.61/bbl while the Mont Belvieu, Texas, price improved by 2% to $18.38/bbl with a 7% gain in margin to $11.80/bbl.

The improved margins reflect the improvement in NGL prices along with natural gas prices dropping 5% in value at both hubs as power generation demand is flat without meaningful heating or cooling demand until the summer arrives.

Heavy NGL prices also benefited from improved West Texas Intermediate (WTI) crude prices, which rose back above $40/bbl on reports from the U.S. Energy Information Administration (EIA) that U.S. inventories declined by 4.4 million bbl. In addition, Iranian production has been slower to return to the market than previously expected. Production from non-OPEC countries has been falling while demand has been slowly increasing with more attractive prices. There are still many headwinds facing the global crude market, but it appears it is slowly improving with forecasted prices in the mid- to low $40/bbl range.

Ethane prices posted strong gains for the week even as ethane cracking capacity is diminishing with cracker turnarounds. Mont Belvieu ethane rose 4% to 18 cents per gallon (/gal) while the Conway price rose 17% to 15 cents/gal. The improvements were partially attributed to improved propane and butane prices, which are making ethane the preferred NGL for ethylene cracking. Ethane demand is expected to further increase once the cracker turnarounds are completed later this year and as export capacity increases out of Marcus Hook and Morgan’s Point.

Demand for LPG exports is slowing, which has resulted in greater-than-expected propane inventory increase for two straight weeks. However, prices continued to improve due to the stronger ethane price, which is creating a higher floor price for propane. The Conway price rose 5% to 41 cents/gal, its highest level in a month, while the Mont Belvieu price improved 2% to 44 cents/gal.

The most profitable NGLs to make remain at the heavy end of the bbl with C5+ leading the way at 72 cents/gal at Conway and 70 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 46 cents/gal at Conway and 38 cents/gal at Mont Belvieu; butane at 34 cents/gal at Conway and 35 cents/gal at Mont Belvieu; propane at 25 cents/gal at Conway and 28 cents/gal at Mont Belvieu; and ethane at 3 cents/gal at Conway and 6 cents/gal at Mont Belvieu.

The EIA reported that natural gas storage levels decreased by 3 Bcf to 2.477 trillion cubic feet (Tcf) the week of April 8 from 2.48 Tcf the previous week. This was 63% higher than the 1.521 Tcf posted last year at the same time and 52% greater than the five-year average of 1.628 Tcf. There should be an uptick in cooling demand in the next week as the National Weather Service is forecasting warmer-than-normal temperatures throughout the U.S.

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

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