Mont Belvieu ethane prices improved alongside natural gas prices as a result of an increase in late summer cooling demand. However, gains were small and frac spread margins continue to be challenged as they remained firmly negative for the final week of August.

Gas prices rose 1% to $3.97 per million Btu (/MMBtu) at Mont Belvieu and 2% to $3.85/MMBtu at Conway. But sustained growth is unlikely due to the late arrival of the warm weather. For the past several years, coal-fired power generation has provided the primary competition for gas, but nuclear claims a higher percentage of the power mix, according to Barclays Capital.

“Weather has been the main wildcard [this summer]. Power generation over the course of the summer has tracked five-year minimums. Moreover, nuclear generation, whose presence as baseload power would back out the higher cost power sources like natural gas in the supply stack, has not seen as high levels of outages as in years past,” the investment firm said in its Natural Gas Market Outlook for Aug. 22. In addition, the strong storage builds this summer have seen the deficit to last year closed to less than 20%, which further limits the price upside for gas.

This also limits the potential for ethane to increase in value. Demand is limited not only on the power generation side but on the petrochemical side, with several major crackers still undergoing maintenance and expansion work. When these crackers come back online in the fall there will still be ample stock levels to work off. The week of Aug. 20 saw ethane prices increase 3% to 22 cents per gallon (/gal), but this was not marginally different than its level for the previous six weeks. The Conway price also held firm as it fell slightly to 19 cents/gal, which is also not much different than the price during the previous six weeks.

Propane and butane prices fell at both hubs as there was a slight rebalancing of price. The Mont Belvieu price for propane decreased slightly to $1.02/gal with the Conway price down 3% to $1.02/gal. Butane fell 1% to $1.21/gal at both hubs.

These products may experience an uptick in value as PIRA Energy Group reported in a research note that LPG export demand is increasing out of Asia, specifically South China. “Lower imports into China, in part due to a change in tax invoicing, has led to inventory draws—prompting a $32 per metric tonne rally in local prices last week. Strong discounts to naphtha and improved seasonal demand should support prices next week while recent price strength leaves room for a correction,” the note said.

Crude prices continue to fall lower as production out of Libya has more than doubled since May and geopolitical threats to global supplies are seemingly subsiding. WTI crude fell to $93 per barrel (/bbl), but C5+ prices posted gains at both Mont Belvieu and Conway. This was another case of prices rebalancing after heavy price decreases the prior week as they returned to similar levels from two weeks prior.

Overall, the theoretical NGL bbl decreased in value by 1% at Conway to $39.16/bbl with a 2% drop in margin to $25.09/bbl. The Mont Belvieu price rose somewhat to $39.61/bbl with a 1% drop in margin to $25.11/bbl.

The most profitable NGL to make at both hubs was C5+ at $1.61/gal at Conway and $1.67/gal at Mont Belvieu. This was followed, in order, by isobutane at 98 cents/gal at Conway and 87 cents/gal at Mont Belvieu; butane at 81 cents/gal at Conway and 80 cents/gal at Mont Belvieu; propane at 67 cents/gal at Conway and 65 cents/gal at Mont Belvieu; and ethane at negative 6 cents/gal at Conway and negative 4 cents/gal at Mont Belvieu.

Late-season high temperatures are expected to continue to elevate cooling demand in most of the country, as the National Weather Service (NWS) predicts warmer-than-normal temperatures for the coming week. The only exception is expected in the Pacific Northwest and Rocky Mountain regions, where the NWS predicts below-average temperatures.

With the cooling season beginning to wind down, the country enters the time of year when weather services offer early forecasts for the upcoming winter. The NWS’ winter temperature outlook, released on Aug. 21, is predicting a mild winter with average and above-average temperatures throughout the northern U.S. from November through March. En*Vantage’s Weekly Energy Report from Aug. 21 notes that there is a large discrepancy between the preliminary forecast from the NWS and from private forecasters.

“The Old Farmers Almanac’s early forecast release (usually we don’t hear from them until September) called for another cold winter (the two competing farmers almanacs were ‘on the money’ last winter with their outlook for a bitter winter),” the firm said in its report. The almanac is predicting a “‘super-cold’ winter in the eastern two-thirds of the country. The west will remain a little bit warmer than normal,” the report said.

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