Natural gas liquid (NGL) prices continued to improve the week of July 17 on the back of several macroeconomic issues. Although ethane prices continued to struggle at both Mont Belvieu and Conway, there is growing evidence that the NGL prices hit their floor in mid-June.

Prices have garnered support from improved West Texas Intermediate (WTI) crude prices along with small gains in the national economy in the past month. Additionally, price supports have come from an increase in fractionation and cracking capacity as facilities that were taken offline earlier this year returned to action.

Ethane posted the largest price gains at both hubs this week, but margins were not good at either hub. The Conway price improved 7% to 21¢ per gallon (/gal), its highest price in nine weeks. This helped the margin improve 25% from the previous week, but the figured remained negative in the Midcontinent. The Mont Belvieu margin fared a little better as it improved 47%, but was only statistically positive. The actual price rose 3% to 25¢/gal, its highest price in five weeks.

It is unlikely that ethane margins will significantly improve any time before the end of 2013 as stock levels remain too high. The market should receive a boost in the beginning of 2014 when Enterprise Product Partners’ ATEX Pipeline is brought online and will transport up to 190,000 barrels (bbl.) per day of ethane from the Marcellus shale to the Gulf Coast.

The market has witnessed the positive impact that new midstream infrastructure can have on an NGL’s price as propane has been supported through additional export capacity along the Gulf Coast in recent months. This boost will increase later this month when Targa Resources completes work on its propane export terminal expansion, which will add 2 million bbl. per month of capacity to the marketplace.

Mont Belvieu propane prices have improved 11% in the past month to 95¢/gal, which is the highest price since it was 96¢/gal the week of April 24. The Conway price has improved 14% in the past month to 91¢/gal, its highest price this year and the largest it has been since it was 93¢/gal the week of April 11, 2012.

Heavy NGL prices didn’t experience the same level of improvements this week as their light counterparts, but remained far more profitable. Isobutane rose 3% at both hubs despite less gasoline demand than normal this summer. Conway prices continue to outpace their Mont Belvieu counterparts due to decreased capacity in the Midcontinent as an isomerization unit is down in the region. This has caused prices to increase to $1.57/gal, its highest price in nearly six months. The Mont Belvieu price rose to $1.35/gal, its highest price in nearly four months. Mont Belvieu prices have been somewhat stagnant due to the downturn in gasoline demand combined with increased cracking capacity along the Gulf that has flooded the market, especially with the Conway outage.

Mont Belvieu butane was largely flat this week as ethane remains the preferred ethylene feedstock, but the product is benefiting from propane exports as it is part of the liquefied petroleum gas (LPG) mix. This has left the price in a bit of a mixed bag situation where the price improved only 1% to $1.30/gal, but this was the hub’s highest price since it was $1.31/gal the week of April 10. The Conway price rose 3% to $1.28/gal, which represented a further narrowing of the price spread between the hubs as butane is gaining some support from isobutane price increases.

Pentanes-plus (C5+) prices moved in opposite directions this week between the two hubs as the Mont Belvieu price rose 1% to $2.14/gal and the Conway price fell 1% to $2.09/gal. The listless market was largely due to stable WTI crude prices.

Despite this, C5+ remained the most profitable NGL to make at both hubs at $1.69/gal at Conway and $1.73/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.21/gal at Conway and 98¢/gal at Mont Belvieu; butane at 90¢/gal at Conway and 92¢/gal at Mont Belvieu; propane at 58¢/gal at Conway and 62¢/gal at Mont Belvieu; and ethane at negative 3¢/gal at Conway and 1¢/gal at Mont Belvieu.

Natural gas prices rose 2% at both hubs due to strong cooling demand that also caused a smaller-than-normal storage injection level of 41 billion cubic feet the week of July 19, the most recent data available from the Energy Information Administration. This increased the storage level to 2.786 trillion cubic feet (Tcf), which was 13% below the figure of 3.185 Tcf posted the same time last year and 2% below the five-year average of 2.832 Tcf.

Cooling demand should continue to level off as temperatures have fallen to normal summer averages in the Northeast and parts of the Midwest. This is expected to continue this week according to the National Weather Service forecast. The only regions with outlier forecasts in this average summer week will be the Gulf Coast with higher-than-normal temperatures and parts of the Northern U.S. that are expected to experience cooler-than-normal temperatures.

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

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