In the early part of spring, it appears that the Northeast skipped spring temperatures and jumped from colder-than-normal weather right to summer temperatures in the 80s and even 90s. This meant that many residents in the region went from heating their homes to cooling them at a similar usage level.

This was a boon for natural gas producers as many regions have switched their power generation from coal-fired to gas-fired in the past several years. Indeed, despite the steep reduction in heating demand, natural gas prices held firm at about $4.00 per millionBtu (/MMBtu) at both Conway and Mont Belvieu.

However, the decrease in heating demand did have a negative effect on propane prices, which fell at both hubs. The Conway price dropped 3% to 87¢ per gallon (/gal), its lowest price in three weeks. The Mont Belvieu price took a 4% downturn to 92¢/gal, the lowest it has been in a month.

Despite the decrease, propane prices remain healthy as En*Vantage anticipates balances to continue to tighten with the inventory level approaching 51 million barrels (bbl.) by July 26. This would be nearly 12 million bbl. below the inventory level recorded last year at the same time and nearly 3 million bbl. below the five-year average.

Prices should continue to benefit from solid export demand in the foreseeable future as well, according to En*Vantage. “The arbitrage between northwest Europe and Mont Belvieu has been narrowing since December, and we have been forecasting that could happen as U.S. propane exports pick up. Sluggish European petrochemical demand and ethylene plant turnarounds on the continent have weakened propane demand and prices in northwest Europe. However, due to the drop in Gulf Coast spot price propane this week, the price spread between northwest Europe propane prices and Mont Belvieu widened this past week,” the company said in its Weekly Energy Report for the week of April 4.

Ethane prices tumbled at both hubs, which was more of a result of a downturn in crude oil prices as ethane and crude have had a more symbiotic relationship of late. “Ethane inventories are forecasted to reach 28.3 million barrels by the end of July; however, ethane prices should continue to track gas prices very closely through July, with regional ethane frac spreads still at negative levels to cause at least 150,000 barrels per day of ethane rejection. This does not mean that ethane prices will drop as it is likely tighter gas balances could cause gas prices to rise which will push ethane prices higher,” according to En*Vantage.

The downturn in crude prices had the biggest impact on heavy natural gas liquid (NGL) prices for the week of April 3. Conway isobutane was tied with ethane for the largest price decrease for the week at 7% as it fell to $1.34/gal. This was its lowest price since it was $1.31/gal the week of June 27, 2012. The Mont Belvieu price took a 5% downturn to $1.39/gal, which was also its lowest price since the week of June 27, 2012 when it was $1.36/gal.

Butane prices fell at similar rates between the two hubs with the Mont Belvieu declining 4% to $1.35/gal, its lowest level since it was $1.32/gal the week of August 1, 2012, and the Conway price declined 5% to $1.28/gal, its lowest price since it was $1.22/gal the week of August 8.

The most profitable NGL to make at both hubs remained C5+ at $1.68/gal at Conway and $1.63/gal at Mont Belvieu. This was followed, in order, by isobutane at 94¢/gal at Conway and 99¢/gal at Mont Belvieu; butane at 86¢/gal at Conway and 93¢/gal at Mont Belvieu; propane at 50¢/gal at Conway and 54¢/gal at Mont Belvieu; and ethane at negative 2¢/gal at Conway and 1¢/gal at Mont Belvieu.

The theoretical NGL barrel price fell 4% at both hubs with the Conway price down to $39.13/bbl. with a 7% drop in margin to $24.52/bbl. and the Mont Belvieu price decreasing to $40.19/bbl. with a 6% drop in margin to $25.33/bbl.

Natural gas storage levels remained lower than their five-year average the week of April 5. According to the Energy Information Administration, storage levels decreased 14 billion cubic feet to 1.673 trillion cubic feet (Tcf) from 1.687 Tcf. This was 33% below the 2.477 Tcf figure posted last year at the same time and 4% below the five-year average of 1.739 Tcf.

Cooling demand could see a drop-off in the Northeast this week as the National Weather Service’s forecast anticipates normal spring temperatures. The southeast and West Coast are both expected to experience warmer-than-normal temperatures. There could still be some heating demand coming out of the Midwest, which is anticipating cooler-than-normal temperatures.

Contact the author, Frank Nieto, at fnieto@hartenergy.com

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