Natural gas liquid (NGL) prices remained volatile the first week of June as trading was very active, but this didn’t translate into improvements as only Conway isobutane showed an increase in value. This downward trend also continued in the case of natural gas prices, although crude prices rose.

Natural gas prices fell 3% to $3.87 per million Btu (/MMBtu) at Conway and 4% to $3.94/MMBtu at Mont Belvieu despite cooling demand experiencing an increase last week. However, the brevity of this increase in demand was not enough to support a sustained price increase.

According to Barclays Capital, the futures market isn’t looking very strong as the investment bank reported that futures prices fell approximately 3% to $4.15/MMBtu. “The front of the curve dropped the most as the hotter-than-normal weather is forecast to subside in the next couple of weeks,” the firm said in its Gas and Power Kaleidoscope for June 3. Barclays Capital anticipates futures prices to balance at an average of $4.00/MMBtu this summer should temperatures fall in line with normal summer weather. They note that a 10% deviation from normal weather either up or down would result in prices rising or falling by 50¢/MMBtu from this $4.00/MMBtu average.

Conway isobutane was the lone NGL to increase in value as it rose 5% to $1.24 per gallon (/gal). This was the highest price at the hub since it was $1.26/gal the week of April 24. This doesn’t appear to be an indication of long-term demand changes so much as traders being caught short at the end of May. According to En*Vantage, isobutane demand is lower in 2013 than in previous years due to increased extraction from gas processing as well as lower gasoline and alkylate demand. The Mont Belvieu price was relatively flat at $1.27/gal, which was largely unchanged from the previous week.

The remaining heavy NGLs saw their prices dip slightly at both hubs, but were solid as West Texas Intermediate crude prices were primarily unchanged and remained in the mid-$90 per barrel (/bbl.) range. Pentanes-plus (C5+) held firm at Mont Belvieu at $2.01/gal while the Conway price dropped 2% to $1.96/gal. The Conway price was the lowest at the hub since it was $1.95/gal the week of September 26, 2012. The market has been quickly rebalancing the last three weeks after experiencing a two-month win streak against the Mont Belvieu price.

Butane prices fell 1% at both hubs with the Mont Belvieu price of $1.24/gal being largely unchanged from the previous week and the Conway price of $1.16/gal also being largely unchanged from the prior week.

Light NGL prices had the largest downturn the first week of June despite improvements in the macro environment. In the case of ethane, both planned and unplanned cracker outages have been turning around, which will lower inventory levels and improve prices. These events failed to have a noticeable impact on prices during the week as the Mont Belvieu fell 4% to 27¢/gal, its lowest price since it was also 27¢/gal the week of March 6. The Conway price tumbled 15% to 18¢/gal, its lowest price since it was 17¢/gal the week of December 12, 2012.

The storage overhang for propane has been decreasing as export demand and capacity has increased, but there has yet to be any pick-up in price at either hub. The value dropped 2% at both hubs with the Mont Belvieu of 90¢/gal being the lowest price since it was the same price the week of March 13. The Conway price of 85¢/gal was also the lowest since the week of March 13 when it was also the same price.

The theoretical NGL bbl. price fell 2% to $35.73/bbl. with a 2% drop in margin to $21.59/bbl at Conway. The Mont Belvieu NGL bbl. price decreased 1% to $38.46/bbl. with a 1% gain in margin to $24.07/bbl.

The most profitable NGL to make at both hubs remained C5+ at $1.53/gal at Conway and $1.57/gal at Mont Belvieu. This was followed, in order, by isobutane at 85¢/gal at Conway and 88¢/gal at Mont Belvieu; butane at 76¢/gal at Conway and 83¢/gal at Mont Belvieu; propane at 50¢/gal at Conway and 54¢/gal at Mont Belvieu; and ethane at negative 8¢/gal at Conway and 1¢/gal at Mont Belvieu.

Despite hotter-than-normal temperatures in the Northeast, natural gas storage levels rose by 111 billion cubic feet the final week of May to 2.252 trillion cubic feet (Tcf) from 2.141 Tcf, according to the Energy Information Administration’s most recent data. This was 22% below the figure of 2.868 Tcf posted last year at the same time and 3% below the five-year average of 2.321 Tcf.

Storage injection levels should increase further this week based on the National Weather Service’s forecast, which anticipates normal temperatures in the Southeast and Midwest and cooler-than-normal temperatures in the Northeast. The forecast anticipates warmer-than-normal temperatures along the Gulf Coast and Southwest.

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

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