Prices for natural gas liquids (NGL) were up the week of July 10 as West Texas Intermediate (WTI) crude prices remained above $100 per barrel (/bbl.). As we noted last week, it is likely that NGL prices will sustain their current levels rather than make significant gains.

This outlook was proven, at least for this week, as only Conway isobutane made significant gains. However, this isn’t directly related to crude improvements, but instead related to limited alkylation capacity in the region as sources maintain that an isomerization unit is undergoing unplanned maintenance.

The theoretical NGL bbl. improved 3% in Mont Belvieu to $39.39/bbl. with a 6% gain in margin to $26.24/bbl. while the Conway price rose 4% to $38.54/bbl. with a 7% increase in margin to $25.46/bbl. Margins benefited from a downturn in natural gas prices at both hubs as they fell 2% to $3.60 per million Btu (/MMBtu) at Mont Belvieu and 1% to $3.58/MMBtu.

Although ethane margins remained firmly negative at Conway and only positive in the smallest of theoretical measures at Mont Belvieu, both margins experienced the largest improvements for the week. Though these improvements look strong in the statistical sense, in the financial sense they were minimal at best.

The price of Conway ethane improved 4% to 20? per gallon (/gal), which was only 1?/gal greater than last’s week price. This was the highest price seen at the hub since one month ago. The Mont Belvieu price had a slight fall to 24?/gal—the same value it has had for the past three weeks.

Ethane prices will face an uphill battle in seeking price improvements for the remainder of the year as stock levels are increasing from planned and unplanned cracker outages. According to Energy En*Vantage Inc., at least 250,000 bbl. per day of ethane is being rejected out of 1.17 million bbl. per day of capacity this month. This figure excludes production out of the Marcellus and Utica shales as there is no solid transportation capacity out of the play to marketplaces at this time. However, this will change when Sunoco Logistics’ Mariner West pipeline comes online later this month.

As ethane continues to struggle for solid footing, propane prices appear to have turned the corner as demand levels are increasing from the European export market as well as from the petrochemical market.

There is still a supply overhang, but this is being worked off, and it is anticipated that propane storage levels will hit their five-year averages in the next three months. This outlook has resulted in solid gains at both hubs the last month. The Mont Belvieu price rose 5% to 93?/gal, its highest level since the week of May 15 when it was 94?/gal. The Conway price improved 4% to 87?/gal, its highest level since it was 88?/gal, which was also the week of May 15.

Heavy NGL prices rose at both hubs, but were largely unchanged from the same time last year due to a reduction in gasoline demand along with a growing disconnect between heavy NGL prices and crude oil prices.

The most profitable NGL to make at both hubs remained C5+ at $1.71/gal at Conway and $1.73/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.17/gal at Conway and 95?/gal at Mont Belvieu; butane at 87?/gal at Conway and 91?/gal at Mont Belvieu; propane at 55?/gal at Conway and 60?/gal at Mont Belvieu; and ethane at negative 4?/gal at Conway and nil at Mont Belvieu.

Lower natural gas prices are making natural gas more attractive for power plants with the capability to switch between coal and gas, as evidenced by natural gas storage levels increasing only 58 billion cubic feet. According to the most recent data available from the U.S. Energy Information Administration, storage levels rose to 2.745 trillion cubic feet (Tcf) the week of July 12, from 2.687 Tcf the previous week. This was due to increased cooling demand from much of the country, especially the Northeast, Midwest and Gulf Coast. This was 13% below the 3.159 Tcf reported last year at the same time and 1% below the five-year average of 2.779 Tcf.

Cooling demand is expected to decrease this week as the National Weather Service’s forecast anticipates cooler-than-normal temperatures in the Northeast and Great Lakes regions. In addition, normal temperatures are expected in parts of the Midwest, Mid-Atlantic and Southeast. The forecast expects warmer-than-normal temperatures along the West Coast, Southwest and Gulf Coast.

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

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