Colder-than-normal temperatures in the Northeast and Midwest continued to support natural gas and propane prices the week of March 13, as heating demand remained very high.

Natural gas prices spiked 10% to $3.87 per million Btu (/MMBtu) at Conway and 8% to $3.89/MMBtu at Mont Belvieu in the week. Storage withdrawal rates for natural gas have been greater-than-normal for this time of year and this trend is expected to continue another three weeks, as most weather forecasts anticipate the cold front to continue.

“If the weather plays out as current forecasts suggest our models are showing that we will see the first deficit to the rolling five-year average inventory since the week ending September 16, 2011,” the company said in its Weekly Energy Report for March 21. “This underlying fundamental strength may likely push us across the strong psychological barrier of $4.00/MMBtu in the prompt month with the prompt continuation potentially testing the next technical level of $4.20/MMBtu in early April.”

Natural gas in storage for the week of March 15, the most recent data available from the Energy Information Administration, fell only 62 billion cubic feet to 1.876 trillion cubic feet (Tcf) from 1.938 Tcf the previous week. However, this was a staggering 21% below the level of 2.378 Tcf reported last year at the same time and only 10% greater than the five-year average of 1.714 Tcf.

Heating demand for this week is expected to rise at a much faster rate as the National Weather Service’s forecast is calling for much colder temperatures than normal for late March. This cold front will run from parts of the Rockies, through the Midwest down to the Gulf Coast and toward the entire Eastern Seaboard.

Propane prices rose 5% to 90¢ per gallon (/gal) at Mont Belvieu and 4% to 85¢/gal at Conway. The Mont Belvieu price was highest it has been since it was 91¢/gal the week of November 7, while the Conway price was the hub’s largest price since it was 86¢/gal the week of October 24.

Ethane have been pretty solid for the past month thanks to an increase in propane prices and solid processing and fractionation capacity, but margins are not good due to the improvement in natural gas prices.

The Conway ethane price fell very slightly to 25¢/gal, but experienced a huge downturn in margin as it officially turned negative once again. The Mont Belvieu price increased 2% to 27¢/gal, its highest price since it was the same price the week of November 14, but the margin still fell 47% to a level that is only theoretically positive.

Heavy natural gas liquids (NGL) prices were mainly down for the week at both hubs as West Texas Intermediate crude oil prices were flat at about $92 per barrel (/bbl.) and the switch over from winter-grade to summer-grade gasoline by refiners.

This switch by refiners, along with low refinery runs, saw both butane and isobutane prices and margins tumble at Conway and Mont Belvieu. Butane prices fell 1% at both hubs with the Mont Belvieu price hitting $1.40/gal and the Conway price dropping to $1.34/gal. Both prices were the lowest in about eight months.

Isobutane prices fell 2% at both hubs with the Mont Belvieu price down to $1.43/gal and the Conway price decreasing to $1.40/gal. Both prices were the lowest at their respective hubs in more than 10 months.

Pentanes-plus (C5+) was the lone heavy NGL to experience an uptick in price during the week as the market rebalanced itself after decreasing steadily for a month. Prices at both hubs rose 2% with the Mont Belvieu up to $2.14/gal and the Conway price improving to $2.19/gal. This was the third consecutive week that the Conway price was greater than its Mont Belvieu counterpart.

The theoretical NGL bbl. price improved 2% at both hubs with the Mont Belvieu price rising to $40.52/bbl. with a 2% drop in margin to $26.31/bbl. and the Conway price improving to $39.75/bbl. with a 3% drop in margin to $25.61/bbl.

The most profitable NGL to make at both hubs was C5+ at $1.76/gal at Conway and $1.70/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.01/gal at Conway and $1.04/gal at Mont Belvieu; butane at 93¢/gal at Conway and $1.00/gal at Mont Belvieu; propane at 50¢/gal at Conway and 54¢/gal at Mont Belvieu; and ethane at negative 1¢/gal at Conway and 2¢/gal at Mont Belvieu.

Data Provided by Intercontinental Exchange. Individual product prices in
cents per gallon. NGL barrel in $/42 gallons | Source: Frank Nieto

Price, Shrink of 42-gal NGL barrel based on following: Ethane, 36.5%; Propane, 31.8%; Normal Butane, 11.2%; Isobutane, 6.2%; Pentane+, 14.3%, Fuel, frac, transport costs not included. Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel. Shrink is defined as Btus that are removed from natural gas through the gathering and processing operation. Source: Frank Nieto

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

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