West Texas Intermediate (WTI) crude prices experienced slight improvements this week as they rose above $30 per barrel (/bbl) based on murmuring from Russia and other increasingly cash-stropped oil producing countries that they would seek to cut production to try to balance the market. Unfortunately this rally seemed to be based more on wishful thinking than on fundamentals as U.S. crude stocks rose to a record 503 million bbl and there is no evidence that production can be pulled back quickly enough to sustain a rally at this time.

The silver lining to this is that the market may be setting a floor price of $30/bbl as En*Vantage notes that market bottoms are established once the market no longer influenced by bearish news. “We believe that oil prices below the $30 level represent more of a call option on crude prices as the market becomes more convinced that enough is enough because a significant supply response will eventually come from the lack of drilling/funds to maintain production or geopolitical instability causes a supply disruption,” the firm said in its Feb. 4 Weekly Energy Report.

The improvement in WTI prices as well as traders covering short sales at the end of the month helped support gains in heavy NGL prices. In fact, there were gains across the board for NGL prices at both Conway and Mont Belvieu.

Isobutane had the biggest gain at both hubs as it rose 13% at each location. This increase was likely a combination of improved crude prices, greater gasoline demand increasing refining output, as well as the sector rebalancing. Prices at both hubs were the highest in more than a month. Butane prices were just behind this increase at 12% at both Conway and Mont Belvieu.

Propane inventory levels have fallen by larger-than-expected rates for two straight weeks due to greater heating demand and strong LPG exports. The Conway price rose 8% to 31 cents per gallon (/gal), its highest price since the first week of 2016. The price at Mont Belvieu was up 9% to 34 cents/gal, its highest price in a month. However, temperatures have been warming up around the country, which is limiting heating demand. In addition, LPG export arbs are contracting and are expected to only gain slightly in the months ahead.

Ethane rejection continues to decrease, but the product is only making modest price improvements due to propane being the most preferred ethylene feedstock at this time. The Mont Belvieu price remained flat at 15 cents/gal and the Conway price gained 1 cent/gal to 14 cents/gal.

Further decreases in natural gas prices improved frac spread margins for each NGL with the largest taking place for ethane. However, C5+ remained the most profitable at 49 cents/gal at both hubs. This was followed, in order, by isobutane at 36 cents/gal at Conway and 32 cents/gal at Mont Belvieu; butane at 28 cents/gal at Conway and 31 cents/gal at Mont Belvieu; propane at 13 cents/gal at Conway and 16 cents/gal at Mont Belvieu; and ethane at 1 cent/gal at Conway and 2 cents/gal at Mont Belvieu.

Natural gas storage withdrawal levels were strong once again at 152 billion cubic feet the week of Jan. 29, which lowered the storage level to 2.934 trillion cubic feet (Tcf) according to the U.S. Energy Information Administration. This was down from the 3.086 Tcf posted the previous week and 20% lower than the 2.444 Tcf posted the prior year at the same time. It was also 18% lower than the five-year average of 2.489 Tcf.

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