Changes are coming. As of Feb. 4, Frac Spread will move to the new HartEnergy.com. Details to come.

Let me be honest, direct and humble: I told you so.

That’s not terribly humble but it is correct. The Dec. 20 Frac Spread warned y’all about the weakening polar vortex that would chill the eastern two-thirds of the country by mid-January. And here it is, and there you are, running low on hot cocoa and reluctant to venture to the store because it’s, well, cold outside. Read the Frac Spread and know the future!

“Unsettled weather may bring a possible winter storm tracking from the Midwest to the Northeast [Jan. 18 through Jan. 20],” said the National Weather Service on Jan. 16. The service is part of the U.S. Department of Commerce, which is closed as part of the shutdown of the federal government. However, it still issues information necessary to protect lives and property.

“Bitter cold temperatures will overtake a large part of the central and eastern U.S.,” the short-range forecast continued. “In fact, the northern Plains will have high temperatures staying below zero on Friday—which is nearly 25 degrees below normal!”

News of the incoming chill spurred an 18% increase in the Henry Hub near-month price in the last week as the hypothetical NGL barrel at Mont Belvieu, Texas, rose 4.4%.

The result is an expanded margin of just under 1% for the barrel, mostly relying on decent expansions of the margins of propane and C5+ in the last week.

Mont Belvieu ethane has languished below 30 cents per gallon (gal) for the past five weeks, although the price in the past week was 5.6% above where it was at this time a year ago. The spread, however, suffered a setback in the past week from almost 9 cents/gal to about 6.3 cents/gal, just a tad under the 6.4 cents/gal of a year ago.

The price is likely to stay in this range as the oversupply of U.S. ethylene continues, said EnVantage Inc. “If there is an ethane price spike, similar to the one seen this past September, it is most likely to occur in the second half of this year when Sasol’s and Formosa’s new ethane crackers become operational, boosting ethane demand by an additional 170,000 barrels per day,” said the analysts.

Propane’s margin expanded in the past week but is 38.5% below where it was a year ago. Rising U.S. propane stocks will temper the price this year, with EnVantage expecting a 50% price relationship with West Texas Intermediate crude oil in the next few weeks and a 40% ratio by the spring.

In the week ended Jan. 11, storage of natural gas in the Lower 48 experienced a decrease of 81 billion cubic feet (Bcf), the U.S. Energy Information Administration reported, compared to the Stratas Advisors expectation of a 76 Bcf withdrawal. The figure resulted in a total of 2.533 trillion cubic feet (Tcf). That is 3% below the 2.61 Tcf figure at the same time in 2018 and 11.4% below the five-year average of 2.86 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.

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