A surprise comeback by crude oil also spurred gains for NGL prices and left questions over whether it was a signal of a recovery with a floor being set or another false dawn in this down market. In just over a week, West Texas Intermediate (WTI) crude gained nearly $10 per barrel (/bbl) in value to reach its highest level of 2016.

This caught many observers by surprise because it came after the U.S. Energy Information Administration (EIA) reported that crude stock levels had increased, including reaching 92% of capacity at the Cushing, Okla., hub.

“Just one month ago, analysts were claiming that if Cushing’s working storage capacity reached 90%, WTI prices would have a good chance of breaking the $20 level. Instead the momentum for WTI is upward with no signs that a logistical bottleneck will occur at Cushing just yet. The market is looking way past record crude inventories and perceives that both domestic and international supply/demand fundamentals will improve,” En*Vantage said in its March 10 Weekly Energy Report.

These positive fundamentals include increased gasoline demand, which has seen gasoline inventory decline by more than 8 million bbl. in the past month even as refinery run rates increased, which is supporting the theory that low crude prices are increasing gasoline demand. Additionally, OPEC production appears to be peaking with additional optimism over a production freeze agreement between some producers. Despite the positives, prices may not experience much more uplift.

“Weighing the pros and cons of the fundamentals, it does appear that crude oil prices are a bit overextended and that a significant amount of short covering has been taking place. It is highly possible a $20 handle will not be seen again this year unless a distressed situation occurs at Cushing, but it is hard to see the upward momentum continuing past $40 until we see signs that U.S. crude inventories are declining and that will take another six weeks for that to occur,” En*Vantage said.

Gains in the crude market helped C5+ prices reached their highest levels for the year as the Conway price rose 8% to 81 cents per gallon (/gal) and the Mont Belvieu price increased 7% to 81 cents/gal. Butane and isobutane prices were more muted due to refiners switching from winter-grade gasoline to summer-grade gasoline.

Light NGL prices continued to make solid gains at both hubs as propane inventories continue to decline and ethane prices are slightly decoupling from natural gas prices. This resulted in propane reaching its highest level for 2016 at both hubs while Mont Belvieu ethane did the same. Conway ethane remains challenged at its second lowest price of the year at 12 cents/gal even after a 10% from the previous week.

Overall the theoretical NGL bbl. price improved 7% at both hubs with the Mont Belvieu price reaching $17.51/bbl. with a 6% gain in margin to $11.55/bbl., and the Conway price improving to $16.46/bbl. with a 10% gain in margin to $11.02/bbl.

The most profitable NGL to make at both hubs was C5+ at 63 cents/gal at Mont Belvieu and 64 cents/gal at Conway. This was followed, in order, by isobutane at 38 cents/gal at Mont Belvieu and 42 cents/gal at Conway; butane at 36 cents/gal at Mont Belvieu and 35 cents/gal at Conway; propane at 30 cents/gal at Mont Belvieu and 27 cents/gal at Conway; and ethane at 5 cents/gal at Mont Belvieu and 2 cents/gal at Conway.

Natural gas storage levels fell by 57 billion cubic feet the week of March 4, the most recent EIA data available. This left inventory at 2.479 trillion cubic feet (Tcf) from 2.536 Tcf the previous week, which was 58% greater than the 1.568 Tcf level posted last year at the same time and 42% greater than the five-year average of 1.752 Tcf. While the heating demand season ends, cooling demand may start earlier than expected as the warm temperatures being experienced along the East Coast are expected to continue into next week according to the forecast from the National Weather Service.

Frank Nieto can be reached at fnieto@hartenergy.com.

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