NGL Prices Improve Despite Shutdown

The U.S. government shutdown hasn’t had much of an impact on commodity prices thus far, although the industry will soon be forced to base some of its market movements on analyst forecasts and outlooks other than hard data from the government.

The Energy Information Administration (EIA) was to begin furloughing more staff beginning October 11, which would cause the agency to cease publishing its weekly reports on natural gas storage and other data. Since these reports help many traders make their decisions, the industry will be flying blind until the shutdown comes to a halt.

The only other real impact on commodity prices related to the shutdown was the decline in West Texas Intermediate crude oil prices based on fears that consumer demand will decrease in line with a possible economic downturn.

As a result, C₅₊ prices took a similar downturn as they fell 1% to $2.06 per gallon at Mont Belvieu and 2% to $1.97 per gallon at Conway. The Mont Belvieu price was the lowest price at the hub since it was $1.98 per gallon the week of June 26. The Conway price was also that hub’s lowest since the week of June 26 when it was $1.95 per gallon.

The other two heavy natural gas liquids (NGL) prices, butane and isobutane, had the largest improvements at both hubs as refining demand continues to increase with refiners switching to winter-grade gasoline. Conway isobutane prices were again greater than their Mont Belvieu counterparts as there are rumors that the local isomerization unit has once again been taken offline for maintenance. This would mark the third time in a year that this has occurred. The price of $1.51 per gallon represented a 5% gain and the its highest value at the hub since it was $1.58 per gallon the week of July 24. The Mont Belvieu price of $1.48 per gallon was the highest at the hub since the week of February 27 when it was $1.50 per gallon

There was near parity between the hubs’ prices for butane as the Conway price rose 7% to $1.44 per gallon and the Mont Belvieu price increased 5% to $1.45 per gallon Both prices were the largest since the refining market began to switch to summer-grade gasoline in late winter in February.

Propane prices ended a four-month losing streak as they posted solid gains at both hubs. Both increased export demand and capacity are having a positive impact on lowering propane storage level. The Mont Belvieu price increased 4% to $1.10 per gallon while the Conway price rose 3% to $1.06 per gallon These prices have put propane on track to reach their five-year inventory levels by the end of October.

While ethane prices also saw improvements at both hubs, NGL remains depressed as frac spread margins are extremely thin at Mont Belvieu and remain negative at Conway. It is expected that ethane will continue to struggle throughout the remainder of the year, even as it slowly improves its price.

It will take significant price improvements for ethane margins to turn positive as heating demand is starting to come online in parts of the country. Though natural gas prices dipped slightly at both hubs, it is likely they will continue to improve as winter approaches.

The theoretical NGL barrel (bbl.) price improved 2% at both hubs with the Mont Belvieu price increasing to $42.47 per bbl. with a 4% gain in margin to $29.46 per bbl. and the Conway price rising to $40.97 per bbl. with a 4% gain in margin to $28.26 per bbl.

The most profitable NGL at each location remained C₅₊ at $1.58 per gallon at Conway and $1.67 per gallon at Mont Belvieu. This was followed, in order, by isobutane at $1.16 per gallon at Conway and $1.13 per gallon at Mont Belvieu; butane at $1.08 per gallon at Conway and Mont Belvieu; propane at 74 cents per gallon at Conway and 77 cents per gallon at Mont Belvieu; and ethane at negative 2 cents per gallon at Conway and 2 cents per gallon at Mont Belvieu.

Natural gas storage levels increased 90 billion cubic feet to 3.577 trillion cubic feet (Tcf) the week of October 4 from 3.487 Tcf the previous week according to the latest information from the EIA. This was 4% below the figure of 3.715 Tcf posted last year at the same time and 2% greater than the five-year average of 3.522 Tcf. Should the government shutdown continue in the weeks ahead, Midstream Monitor will endeavor to report on storage forecasts from industry analysts until the EIA reports return.

Heating demand is expected to increase in the Midwest according to the National Weather Service’s forecast for the week of October 15 to October 19, which anticipates cooler-than-normal temperatures in the region. However, this will be countered by warmer-than-normal temperatures along the East Coast that will run into the Southeast and parts of the Gulf Coast. Tthe National Weather Service indicated it will continue to issue forecasts even if the government shutdown continues.