Ethane prices increased at both Conway and Mont Belvieu despite six crackers being taken down for unplanned maintenance. These facilities represent just over 9 billion pounds per year of capacity, which is approximately 16% of total domestic cracking capacity.

It is expected that the majority of the plants that are currently offline will return to service in the next two weeks. In addition to Equistar Chemical’s Clinton, Iowa cracker and Williams’ Geismar, Louisiana cracker, the following crackers also went down unexpectedly in the past two weeks: ExxonMobil’s 2.12 billion pounds per year Baton Rouge, Louisiana facility; Dow Chemical’s 1.5 billion pounds per year LHC-7 cracker in Freeport, Texas; Westlake Chemical’s Petro #1 cracker in Lake Charles, Louisiana that has a capacity of 1.25 billion pounds per year; and ChevronPhillips’ 2.05 billion pounds per year Sweeny, Texas #33 cracker.

The dichotomy of prices rising while demand falls is due to the strength of the other natural gas liquids (NGL), specifically propane. The large correlation between these two products, especially in the Midcontinent where only E-P mix is traded, is helping to support a weak ethane market.

While ethane was able to increase 2% at Mont Belvieu and 4% at Conway, it still has a negative frac spread at Conway and is only theoretically positive at Mont Belvieu. The Kansas price of 21¢ per gallon (/gal) is the same level it has traded at for the past three weeks. The Texas price of 25¢/gal was also in the same range it has traded at for the past month.

By comparison, propane prices improved 6% at Mont Belvieu and 5% at Conway and saw margins improve 8% at both hubs. The Texas price of $1.07/gal was the highest price at the hub since it was $1.16/gal the week of April 25, 2012 while the Kansas of $1.04/gal was the hub’s largest price since it was $1.07/gal the week of March 21, 2012.

The reason for these increases is not only related to the increased liquefied petroleum gas (LPG) export capacity and demand levels, but also reflects traders gearing up for a strong crop drying season as well as an approaching heating season. Both should be stronger than they were in 2012 when a late winter delayed heating demand while also pushing back crop drying season to be nearly non-existent.

Butane posted the largest price gains of any heavy NGL during the week as refiners continue to switch from summer-grade gasoline to winter-grade gasoline. The price rose 8% at Mont Belvieu to $1.36/gal, its highest price since it was $1.41/gal the week of March 27. The Conway price increased 3% to $1.33/gal, which was its highest price since it was $1.34/gal, also during the week of March 27.

Mont Belvieu isobutane prices were slightly lower than its sister product butane at the hub as demand has decreased with LyondellBasell reportedly no longer cracking the product, according to an En*Vantage report. The Conway price fell 1% to $1.41/gal as volatility was very limited at the hub, which is continuing to recover to ONEOK’s isomerization unit being offline for several weeks.

These prices resulted in the theoretical NGL bbl. price to rise at both hubs with the Mont Belvieu price increasing 4% to $42.10/bbl. with a 3% gain in margin to $29.24/bbl and the Conway price improving 3% to $40.95/bbl. with a 2% gain in margin to $28.49/bbl.

The most profitable NGL to make at both hubs remained C5+ at $1.79/gal at Mont Belvieu and $1.74/gal at Conway. This was followed, in order, by isobutane at $1.01/gal at Mont Belvieu and $1.07/gal at Conway; butane at $1.00/gal at Mont Belvieu and 97¢/gal; propane at 75¢/gal at Mont Belvieu and 73¢/gal at Conway; and ethane at 1¢/gal at Mont Belvieu and negative 1¢/gal at Conway.

Natural gas in storage for the week of August 16, the most recent data available from the Energy Information Administration, increased 57 billion cubic feet to 3.063 trillion cubic feet (Tcf) from 3.006 Tcf the previous week. This was 7% below the 3.301 Tcf figure posted last year at the same time and 2% greater than the five-year average of 3.019 Tcf.

Cooling demand has been somewhat limited the past month or so with Northeast temperatures operating at normal summer levels. However, this is expected to change in the coming week as the National Weather Service is forecasting that warmer-than-normal temperatures throughout much of the country.

(Editor’s note: We incorrectly listed the Mont Belvieu price for ethane at 33¢/gal in last week’s issue of Midstream Monitor rather than 24¢/gal. If you would like to be sent a corrected version of the frac spread and NGL price charts please email Frank Nieto at fnieto@hartenergy.com.)

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