West Texas Intermediate (WTI) crude prices continued to rise and fall on the slightest hint of changes in the market as it traded below $45 per barrel (/bbl ) on Oct. 27 as Goldman Sachs issued a report that forecast crude prices could fall “sharply.” This forecast claimed that distillates storage in both the U.S. and Europe was approaching record highs.

However, En*Vantage Inc. noted that, according to the latest data from the U.S. Energy Information Administration (EIA) , distillates storage was only 50% full. The company agreed with the assessment that European storage was approaching record levels.

“Across the pond, recent news reports have indicated that oil traders are preparing to store European diesel in giant tankers in preparation for balances to worsen as shell capacity at the Amsterdam-Rotterdam-Antwerp (ARA) hub is around 70%, near maximum technical capacity. Extremely low water levels along the Rhine River have restricted barge traffic along the artery into inland European markets in recent weeks, compounding pressure on the ARA storage hub. This appears to be a bottleneck that can be resolved over time rather than a systemic surplus,” the company said in its October 29 Weekly Energy Report. The mood swung on October 28 after the EIA reported that Cushing, Okla., oil and product stocks fell and signs pointed to product demand increasing.

It is likely that such severe swings will continue until storage levels move closer to a balance with demand levels. The consensus at Hart Energy’s Midstream Texas event in San Antonio, Texas, this past week was that WTI prices will remain challenged at least through the first-half of 2016.

Natural gas prices should improve before the end of the year once heating demand arrives, though there is a lot of room to make up as prices were down in the low $2.00 per million Btu as October drew to a close.

In a sign of improvement, ethane margins have begun to diverge from gas prices as balances have been tightening. The frac spread was positive for ethane at both Mont Belvieu and Conway. However, En*Vantage noted that ethane margins are still negative in all of the major processing regions outside of Mont Belvieu due to transportation and fractionation costs.

“Consequently, ethane rejection is continuing and it is estimated to be around 600,000 bbl/d. This rejection, combined with strong ethane cracking, should cause ethane inventories to drop through January,” according to En*Vantage. While ethane balances and margins will improve, it is unlikely that prices will have much movement during this time as storage levels must still be worked off.

Though ethane experienced the biggest improvement in margin at both hubs, the NGL with the most profitable margin remained C5+ at 73 cents/gal at Conway and 74 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 38 cents/gal at Conway and 37 cents/gal at Mont Belvieu; butane at 33 cents/gal at Conway and 36 cents/gal at Mont Belvieu; propane at 20 cents/gal at Conway and 23 cents/gal at Mont Belvieu; and ethane at 3 cents/gal at Conway and 5 cents/gal at Mont Belvieu.

Natural gas storage growth slowed down a bit as injections were down to 63 billion cubic feet the week of Oct. 23 ─high for this time of year, according to the latest data from the EIA. This put the storage level at 3.877 trillion cubic feet (Tcf) from 3.814 Tcf the previous week. This represented a 12% increase from the 3.468 Tcf figure posted last year at the same time and 4% growth over the five-year average of 3.724 Tcf. It is likely that storage will continue to grow as the National Weather Service is forecasting warmer-than-normal temperatures throughout much of the country due to the El Nino season.

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