Light natural gas liquid (NGL) prices showed improvements the week of February 20, but the overall NGL barrel (bbl.) price decreased as crude prices have turned bearish the last few weeks.
West Texas Intermediate crude prices traded at about $92 per bbl. during the week as domestic demand continues to lessen. According to the Energy Information Administration (EIA), storage levels hit their highest level for a late February period since the agency began recording this data in 31 years ago. Brent crude prices also fell to about $111/bbl. for the week as the outlook for the European economy remains poor. In addition to a downturn in crude prices, heavy NGLs were also negatively impacted by refiners switching to the production of summer-grade gasoline.
Such sentiments resulted in sizable losses for heavy NGLs at both hubs. Mont Belvieu isobutane tumbled 6% to $1.59 per gallon (/gal), its lowest level since it was $1.56/gal the week of August 8. The Conway price fell 3% to $1.63/gal, its lowest price in six weeks.
The price of butane dropped 4% to $1.58/gal at Mont Belvieu, its lowest price since it was $1.52/gal the week of October 17 while the Conway price decreased 3% to $1.53/gal, its lowest price since it was $1.49/gal the week of October 17.
Mont Belvieu C5+ also fell 4% for the week as it wound down to $2.32/gal, its lowest price in six weeks. The Conway price dropped 3% to $2.30/gal, which was its lowest price since it was $2.17/gal the week of January 16.
While heavy NGL prices struggled, the light NGLs showed renewed signs of life at both hubs. Mont Belvieu ethane improved 5% to 26¢/gal, its highest price thus far in 2013. The Conway price showed slower growth of 2% to 24¢/gal, its highest price in a month.
Although market fundamentals are improving for ethane, En*Vantage cautioned that the outlook for ethane remains depressed for the immediate future. “As ethane rejection diminishes and new ethane extraction comes online it is very possible that ethane supplies will overwhelm the market again unless the ethylene industry maximizes ethane cracking and operates at 95% of capacity,” the company said in its Weekly Energy Report for February 28.
Propane prices rose 1% at both hubs for the week as the Mont Belvieu price increased to 90¢/gal and the Conway price improved to 83¢/gal. The Texas price was the highest it has been since the final week of 2012, when it was 88¢/gal. The Kansas price was its highest since the final week of October, when it was 84¢/gal. Prices are being supported by a diminished storage overhang in the Gulf Coast.
Natural gas storage levels have also been getting worked off for the past month as heating demand remains strong. According to the EIA, natural gas in storage for the week of February 22 dropped 171 billion cubic feet to 2.229 trillion cubic feet (Tcf) from 2.4 Tcf the previous week. This was 12% lower than the storage level of 2.536 Tcf reported last year at the same time and 16% greater than the five-year average of 1.921 Tcf.
These storage levels helped to increase natural gas prices as the Mont Belvieu price rose 6% to $6.25 per million Btu (/MMBtu) while the Conway price increased 7% to $3.49/MMBtu.
Stronger natural gas prices combined with weaker overall NGL prices resulted in the theoretical NGL bbl. price dropping at both hubs. The Conway price dropped 2% to $41.67/bbl. with a 5% drop in margin to $28.92/bbl. The Mont Belvieu also fell 2% to $42.65/bbl. with a 5% drop in margin to $30.23/bbl.
The weaker market for NGLs saw frac spread margins drop across the board at both hubs. However, the most valuable NGL to make remained C5+ at $1.91/gal at Conway and $1.94/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.28/gal at Mont Belvieu and $1.25/gal at Conway; butane at $1.17/gal at Mont Belvieu and $1.23/gal at Conway; propane at 51¢/gal at Mont Belvieu and 56¢/gal at Conway; and ethane at 1¢/gal at Conway and 4¢/gal at Mont Belvieu.
The National Weather Service’s forecast for this week should cause heating demand to remain stable in much of the country as it anticipates colder-than-normal temperatures along the East Coast running into the Deep South as well as parts of the Midwest and Gulf Coast. The forecast is calling for warmer-than-normal temperatures in New England and the Southwest.
Contact the author, Frank Nieto, at fnieto@hartenergy.com
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