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 a decrease in demand for NGLs.

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

Though prices fell below the $4 per 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 at Conway for the month as they fell to 22¢ per gallon. This resulted in margins turning negative. Mont Belvieu ethane was theoretically positive for the month, but experienced a 2¢ per-gallon drop in price to 29¢ per gallon. High ethane stock levels was the primary culprit for these price decreases as ethylene demand dropped in the month when 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. This switch has resulted in the normal spring downturn for isobutane prices, which lost nearly 20¢ per gallon at Conway on an average, month-to-month basis from March to April and 15¢ at Mont Belvieu during that same timeframe.

Butane experienced similar downturns at each hub, but has been able to take advantage of LPG exports. However, most producers and midstream companies have told Hart Energy that the bulk of these LPG volumes have been comprised of propane. As of early May, butane prices had surpassed isobutane prices at Conway and had nearly reached parity with those prices at Mont Belvieu.

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

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