After a torrid start to 2013 that saw a cold winter drive natural gas liquids (NGL) and natural gas prices up and storage levels down, the arrival of the shoulder season saw the market cool off for NGLs.

However, natural gas prices were able to grow in the month as there was sufficient cooling demand in the early part of April to help prices trend up. Conway natural gas prices rose 6% to $4.12 per million Btu (/MMBtu) while Mont Belvieu prices increased 7% to $4.23/MMBtu.

Though prices fell below the $4.00/MMBtu threshold in the first few weeks of May, they are expected to remain in this price range throughout the summer as long as normal temperatures persist. However, the one major headwind facing natural gas prices is that some utilities have begun to switch back to using coal, which has become cheaper. According to Barclays Capital, these potential switches will limit the upside risk for prices.

The improvement in gas prices had a negative impact on frac spread margins, especially in the case of ethane. Ethane prices lost approximately 5¢ per gallon (/gal) at Conway for the month as they fell to 22¢/gal. This resulted in margins turning negative. Mont Belvieu ethane was theoretically positive for the month, but experienced a 2¢/gal drop in price to 29¢/gal. High ethane stock levels was the primary culprit for these price decreases as ethylene demand dropped in the month as seven ethane crackers were taken offline. Ethane prices will remain susceptible to any changes to its supply chain until more ethane crackers are brought online in 2017.

Although propane margins fell at both hubs, this was entirely a result of improved natural gas prices as propane prices held firm from March to April. These prices were supported by stock levels falling to their lowest levels in five years as well as strong demand for liquefied petroleum gas (LPG) exports.

Heavy NGL prices have failed to maintain their normal correlation with West Texas Intermediate crude oil prices as refiners are switching from winter-grade gasoline to summer-grade gasoline. Butane has been able to take advantage of LPG exports, but most producers and midstream companies have told Midstream Monitor that the bulk of these LPG volumes have been comprised of propane.

For the month, the average NGL barrel (bbl.) price at Conway decreased 4% to $38.67/bbl. with a 9% drop in margin to $23.61/bbl. The average NGL bbl. price for the month of April fell 3% to $40.37/bbl. at Mont Belvieu with an 8% drop in margin to $24.92/bbl.

The most profitable NGL to make at both hubs remained C5+ at $1.75/gal at Conway and $1.62/gal at Mont Belvieu. This was followed, in order, by isobutane at 85¢/gal at Conway and 90¢/gal at Mont Belvieu; butane at 78¢/gal at Conway and 84¢/gal at Mont Belvieu; propane at 50¢/gal at Conway and 57¢/gal at Mont Belvieu; and ethane at negative 6¢/gal at Conway and 1¢/gal at Mont Belvieu.

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