A year ago, my predecessor in this position—desperate for even a tinge of optimism—wrote about the glee fast spreading throughout the Oil Patch as the price of West Texas Intermediate (WTI) soared above $30 per barrel (bbl).

That’s right. A barrel of WTI was $30 just one Super Bowl ago.

Now that January 2017 ran its course, the industry finds hope more easily. After all, WTI has stayed solidly in the mid-$50/bbl range for a while now; the man who used to run ExxonMobil Corp. (NYSE: XOM) now runs the U.S. State Department; and two major pipeline projects all but given up for dead are now good bets to resume construction, cheered on by the new occupant of the Oval Office.

But that’s oil, and while oil prices influence natural gas prices, and natural gas prices affect NGL prices, the differentiation between oil and NGL becomes starker all the time. While oil and gas have been relatively stable so far in 2017, ethane plunged into a price abyss, only clawing its way back in the past week. The ethane price drop is the first way NGL prices will impact profits:

  • En*Vantage points to a number of issues dragging down ethane. The analysts have noted in past weeks that petrochemical companies are holding onto their ethane in anticipation of higher prices later in the year. Recently, though, three crackers—Exxon Chemical in Baton Rouge, La.; Formosa #2 at Point Comfort, Texas; and Chevron Phillips #33 at Sweeney, Texas—were scheduled for turnarounds at the same time, taking 180 Mbbl/d of ethane cracking demand off the market. Ethane rejection may have spiked to 700 Mbbl/d, En*Vantage speculates. But the analysts also suggest that producers buy now: “The fire sale on ethane may not last for long.”
  • High export levels for propane are keeping prices high. At Mont Belvieu, Texas, the price cracked 80 cents per gallon (gal) for the first time since November 2014. The 27-month high was achieved at Conway, Kan., too, though 80 cents/gal was just barely missed. Inventories are tightening, but if the prices continue to rise then exports could suffer. En*Vantage noted that some European petrochemical companies have already switched to naphtha due to cost.
  • Butane sold at a slight premium to isobutane at Mont Belvieu in January, though that trend reversed during the first week of February. At Conway, isobutane’s taking a wild ride, averaging almost $1.30/gal for the week after peaking on Jan. 26 at $1.47/gal.

The price of the hypothetical NGL barrel at Conway broke through $30 this past week for the first time since November 2014. (And if you were wondering, the barrel last hit $40 in September 2014.) At Mont Belvieu, the price rose by 5% in the past week but still did not set a high for the year.

Storage of natural gas in the Lower 48 declined by 87 billion cubic feet (Bcf) in the week ended Jan. 27, the U.S. Energy Information Administration reported. The decrease, slightly above the Bloomberg consensus of 85 Bcf, resulted in a total of 2.711 Tcf. The figure is 8.9% less than the 2.977 Tcf figure at the same time in 2016, and 2.2% below the five-year average of 2.652 Tcf.

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

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