Light natural gas liquids (NGL) prices continued to gain strength as the spring approaches with supply-and-demand levels reaching equilibrium thanks to heating demand, increased fractionation and liquefied petroleum gas (LPG) export capacity.

The increase in heating demand caused propane prices to increase 4% at both Mont Belvieu and Conway. The Mont Belvieu price of 93¢ per gallon (/gal) was the highest at the hub since it was 97¢/gal the week of October 31, while the Conway price of 89¢/gal was the hub’s largest since it was the same price the week of April 11, 2012.

Natural gas prices have also spiked at both hubs in recent weeks due to the extended cold front affecting much of the Northeast and Midwest. Prices rose above $4.00 per million Btu (/MMBtu) at both hubs.

This increase in heating demand has been both a positive and a negative for ethane. It has been positive in the sense that it improved propane prices, which are helping support an increase in ethane prices. The negative is that it is also driving up natural gas prices at a faster rate, which has had a notable pushback on its frac spread margin.

Although ethane had the largest price improvements at both Mont Belvieu and Conway this week, the Conway margin remained negative for the second straight week and the Mont Belvieu margin was only positive in a theoretical sense. The Conway price improved 5% to 26¢/gal, its highest price since the end of January, and the Mont Belvieu price improved 6% to 29¢/gal, the hub’s highest price since it was the same price the week of October 31.

The Mont Belvieu margin had the largest increase from the previous week as it increased 51% while the Conway margin rose 3%. However, a 4% improvement in natural gas prices at Conway to $4.04/MMBtu and a 3% increase at Mont Belvieu to $4.00/MMBtu caused margins to remain in a non-attractive state.

While light NGL prices are experiencing gains, heavy NGL prices have struggled the last few weeks as refiners switch to summer-grade gasoline and have reduced runs. This has occurred even as crude oil prices improved the week of March 20, when they rose above $95.00 per barrel (/bbl.).

This increase resulted in heavy NGL prices stabilizing despite the reduced demand. Pentanes-plus (C5+) margins fell at both hubs despite prices that largely remained the same from the previous week.

These prices saw the theoretical NGL bbl. price to improve 2% at both hubs, but the Conway margin for this bbl. dropped slightly while the Mont Belvieu margin improved at a slower rate of 1%. The Conway bbl. price rose to $40.33/bbl. with a margin of $25.57/bbl., and the Mont Belvieu bbl. price increased to $41.12/bbl. with a margin of $26.51/bbl.

The most profitable NGL to make at both hubs remained C5+ at $1.47/gal at Conway and $1.69/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.03/gal at Conway and $1.04/gal at Mont Belvieu; butane at 90¢/gal at Conway and 98¢/gal at Mont Belvieu; propane at 52¢/gal at Conway and 56¢/gal at Mont Belvieu; and ethane at negative 1¢/gal at Conway and 2¢/gal at Mont Belvieu.

Natural gas storage levels should continue to fall this week as the National Weather Service’s forecast anticipates colder-than-normal temperatures in much of the country. This cold front is expected to run throughout the Midwest and much of the Rockies and Gulf Coast to the East Coast. The West Coast is expected to experience warmer-than-normal temperatures for early April, but since this region isn’t the biggest heating demand center, it shouldn’t have much of an impact on storage levels either way.

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

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