The week of February 10 saw propane prices continue to retreat along with winter temperatures. This was good news for utilities as it gave them a week to restock their supplies of propane in advance of the major storm that hit the Northeast as the week came to a close.

Although temperatures weren’t quite as bitter as they had been, it is important to note that snow results in more school and work closures and more home heating demand. As a result, natural gas prices remained high at both Conway and Mont Belvieu with prices averaging more than $7 per million British thermal unit (MMBtu). Prices would have increased further, but storage levels are still strong even with large withdrawals. Additionally, the midstream infrastructure in North America is so widespread that various regions are able to ship excess supplies to regions with stronger demand. This redirection has taken place with Gulf Coast propane and West Coast gas supplies moving to the Northeast and Midwest.

There may have been calls for a better system from some regulators and market participants, but it is hard to argue with the one currently in place. FERC has requested that priority be given to the Northeast and Midwest for propane supplies and local officials have requested the same in these markets. However, as of February 13, the day a nor’easter ground much of the region to a halt following a great deal of snowfall, gas prices averaged $5-6 per MMBtu, including New York and Chicago. It seems that any price spikes and supply disruptions are largely short-term in nature, with the notable exception of the storage-constrained New England region. Even another late winter storm is unlikely to have a long-term impact on gas and propane storage and prices.

Just two weeks after Conway propane prices averaged a staggering $3.94 per gallon, they fell another 33% to $1.95 per gallon. The Mont Belvieu price actually increased 1% to $1.61 per gallon, but this was more a result of supplies moving out of the hub to Conway than any increase in local demand. It is possible another price spike will occur next week, but prices should return to normal levels within the next month.

The same is true of ethane prices, although Mont Belvieu prices may remain at their current 40 cents per gallon level for the next month while ethane cracker turnarounds are still under way. The Conway price remains challenged as it was unchanged at 13 cents per gallon with very little volatility. Rejection is widespread in both the Rockies and Midcontinent, which should eventually lead to demand at the hub for E-P mix.

Mont Belvieu isobutane demand remains weak, resulting in prices falling another 7% to $1.48 per gallon. This left the product as the second least valuable product at the hub. Its sister product butane dipped 5% to $1.50 per gallon, but remains stronger due to export demand. In fact, it is likely that the price decrease was due to a decrease in liquefied petroleum gas exports with the redirection of propane to other U.S. markets. Conway butane had the second largest decrease at the hub as it was down 9% to $1.38 per gallon, its lowest price in five weeks as refining demand is limited at the hub.

The theoretical natural gas liquids (NGL) barrel (bbl.) price was down at both hubs with the Conway price falling 19% to $51.15 per bbl. with a 26% drop in margin to $25.03 per bbl. The Mont Belvieu price was largely unchanged at $51.21 per bbl. with a 21% decrease in margin to $23.56 per bbl.

The most profitable NGL to make at both hubs was C5+ at $1.31 per gallon at Conway and $1.24 per gallon at Mont Belvieu. This was followed, in order, by propane at $1.29 per gallon at Conway and 91 cents per gallon at Mont Belvieu; isobutane at 90 cents per gallon at Conway and 73 cents per gallon at Mont Belvieu; butane at 64 cents per gallon at Conway and 72 cents per gallon at Mont Belvieu; and ethane at negative 34 cents per gallon at Conway and negative 10 cents per gallon.

Natural gas storage levels the week of February 7, the most recent data available from the Energy Information Administration, decreased by 237 billion cubic feet to 1.686 trillion cubic feet (Tcf) from 1.923 Tcf the previous week. This was 34% below the 2.549 Tcf posted last year at the same time and 27% below the five-year average of 2.317 Tcf.

Withdrawal levels could be much lower the week of February 17, as the National Weather Service’s forecast is calling for warmer-than-normal temperatures in much of the country, including the East Coast, Gulf Coast and Midwest. The West Coast is expected to experience colder-than-normal temperatures, but this is unlikely to have a major impact on gas demand.

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