NGL Prices Remain Stable As Weather Returns To Normal

Natural gas liquids (NGL) prices were stable the week of January 8 while natural gas prices retreated at a quicker pace following the return of normal winter temperatures after a sustained cold front to start 2014.

Overall gas prices remained fairly strong despite experiencing an 8% decrease at Conway to $4.34 per million Btu (MMBtu) and a 3% decline to $4.27 per MMBtu at Mont Belvieu as heating demand west of the Rockies was down due to warmer-than-normal temperatures. In fact, futures prices began to trend upward by January 13 as forecasts are predicting another cold front that could result in more storage declines.

Propane price movements provided further evidence that the market continues to expand. The Mont Belvieu price grew 2% even with the decline in heating demand because export demand remains strong. The price of $1.27 per gallon was the highest in a month. The Conway market is more closely tied to heating demand and experienced a 2% decline to $1.41 per gallon—the third-highest price in more than two years—as PADD II inventory levels continue to set five-year low levels.

Ethane prices remain challenged, especially in the Midcontinent, where the market has virtually dried up in the past six months. Volatility was extremely limited as prices dipped another 1% at Conway to 17 cents per gallon, their lowest level in just over a year. The margin is a startling negative 12 cents per gallon, which is making rejection the status quo at the hub. The story isn’t that much better for the product at Mont Belvieu: prices fell 1% to 29 cents per gallon, the lowest level in a month.

Conway butane had the largest price downturn as it fell 4% to $1.37 per gallon, its lowest price since it was $1.34 per gallon the week of December 11. It appears as though prices balanced out this week after experiencing large gains the previous week due to shortages. The Mont Belvieu price improved slightly to $1.40 per gallon, the first time that it has held a greater value than its Conway counterpart since the first week of December.

Isobutane prices experienced gains at both hubs although the market remains weaker than in years past. The Mont Belvieu price of $1.45 per gallon was 30 cents per gallon lower than last year at the same time and the Conway price of $1.48 per gallon was 15 cents per gallon lower than the same time period last year. The main reason that isobutane has struggled is because of increased competition from higher condensate production as well as lower diluent demand in Canada, according to En*Vantage.

West Texas Intermediate crude prices were flat at $94 per barrel (bbl), which resulted in C₅₊ prices only experiencing a slight uptick in price at both hubs. The Mont Belvieu price increased to $2.08 per gallon, its second-lowest price since the week of November 6 when it was $2.04 per gallon. The Conway price of $2.04 per gallon was that hub’s second-lowest price since it was $2.02 the week of November 13.

The theoretical NGL Bbl. price increased 1% to $44.95 per Bbl. at Mont Belvieu with a 4% increase in margin to $29.35 per Bbl. The Conway price decreased 1% to $44.43 per Bbl. with a 3% gain in margin to $28.57 per bbl.

The most profitable NGL to make at both hubs remained C₅₊ at $1.55 per gallon at Conway and $1.60 per gallon at Mont Belvieu. This was followed, in order, by isobutane at $1.05 per gallon at Conway and $1.02 per gallon at Conway; propane at $1.01 per gallon at Conway and butane at 95 cents per gallon at Mont Belvieu; butane at 92 cents per gallon at Conway and propane at 88 cents per gallon at Mont Belvieu; and ethane at negative 12 cents per gallon at Conway and 1 cent per gallon at Mont Belvieu.

Further evidence that the polar vortex had a significant impact on gas markets was provided by the Energy Information Administration’s most recent storage report, which stated that inventory levels fell by 287 billion cubic feet. The 2.530 trillion cubic feet (Tcf) reported for the week of January 10 was 21% below the 3.189 Tcf reported last year at the same time and 15% below the five-year average of 2.973 Tcf.

These levels could drop even further as the National Weather Service’s forecast for the week of January 20 anticipates much colder-than-normal temperatures throughout the eastern portion of the country from the Gulf Coast and Great Lakes region out to the Eastern Seaboard. However, as mentioned previously, these temperatures will be somewhat countered by hotter-than-normal temperatures in the Western U.S.