It was another down week for energy commodities as crude oil, natural gas and natural gas liquids (NGL) prices saw price downturns the second week of March. The lone NGL to experience gains in prices and margins was propane, which only experienced incremental increases.

Conway propane saw a 1% improvement to 82¢ per gallon (/gal), which was approximately the same average price it had for the month of February. Mont Belvieu propane experienced a slight improvement to 86¢/gal, which was also approximately the same price as the previous month’s average price.

While these improvements are slow, they are reflective of the storage overhang slowly being worked off. This should pick up at steady rate in the coming weeks and months now that Enterprise Products Partners’ expanded liquefied petroleum gas (LPG) export terminal on the Houston Ship Channel began operations. In the case of the Midcontinent, the storage overhang level has subsided and is now 5 million barrels (bbl.) lower than at the same time last year. This reduction is the primary driver in the improvement for Conway prices.

Thus far butane and isobutane, the other two products besides propane in LPG, haven’t experienced the same price advances as propane due to refiners switching to summer-grade gasoline combined with the downturn in crude prices to the low $90 per bbl. range the past few weeks.

Indeed, butane fell 5% at Mont Belvieu to $1.41/gal and 4% at Conway to $1.35/gal. Both prices were among the lowest at their respective hubs in at least six months. The Mont Belvieu price was the lowest since the week of August 1, when it was $1.32/gal and the Conway price was the lowest since it was $1.31/gal the week of September 26.

Conway isobutane had the largest price decrease for any NGL during the week as it dropped 7% to $1.43/gal, its lowest price since it was $1.42/gal the week of July 11. The Mont Belvieu price held a bit firmer as it decreased 3% to $1.46/gal, the first time in three weeks that the Gulf Coast price outperformed the price in the Midcontinent.

Pentanes-plus (C5+) had the smallest price dip of the heavy NGLs at both hubs with the Mont Belvieu price declining 2% to $2.10/gal, its lowest price since mid-October, and the Conway price decreasing 3% to $2.14/gal, its lowest price since mid-December. This was the second consecutive week that the Conway price was greater than its Mont Belvieu counterpart.

Ethane prices fell at similar paces as C5+ at both hubs with the Mont Belvieu price dropping 2% to 27¢/gal and the Conway price falling 3% to 25¢/gal. These price declines pushed ethane margins down at both hubs to a range that while still ostensibly positive, are in reality negative. While there is light at the end of the tunnel with ethane rejection helping the market balance it is likely that this will be a short-term gain and the market will continue to face rejection into 2014 as production will increase incrementally as prices improve, which will force a push back by processors and end-users.

Further hurting ethane margins during the week were marginal decreases in natural gas prices, which continue to benefit from colder temperatures in the Northeast and Midwest. The Conway price fell 1% to $3.52 per million Btu (/MMBtu) and the Mont Belvieu price decreased less than 1% to $3.60/MMBtu. However, the forward market for natural gas has not seen much of a bump from these recent improvements as they are being driven by temporary increases in demand.

The theoretical Conway NGL barrel (bbl.) price dropped 3% to $39.12 per bbl. with a 3% decrease in margin to $26.27 per bbl. The Mont Belvieu NGL bbl. price declining 2% to $39.91/bbl. with a 3% drop in margin to $26.75 per bbl.

The most profitable NGL to make at both hubs was C5+ at $1.74/gal at Conway and $1.70gal at Mont Belvieu. This was followed, in order, by isobutane at $1.08/gal at Conway and $1.10/gal at Mont Belvieu; butane at 98¢/gal at Conway and $1.04/gal at Mont Belvieu; propane at 49¢/gal at Conway and 53¢/gal at Mont Belvieu; and ethane at 1¢/gal at Conway and 3¢/gal at Mont Belvieu.

The aforementioned cold weather in key U.S. markets resulted in a 145 billion cubic feet decrease in natural gas storage levels the week of March 8, according to the Energy Information Administration. This pushed the storage level to 1.938 trillion cubic feet (Tcf) from 2.083 Tcf the previous week. This was 19% lower than the 2.378 Tcf level reported last year at the same time and 11% above the 1.740 Tcf five-year average.

There might be another week or two of increased heating demand in these regions as the National Weather Service’s forecast for the week anticipates cooler-than-normal temperatures in the entire northern half of the country along with the West Coast and parts of the Southwest. The Southeast and Gulf Coast regions are expected to experience warmer-than-normal temperatures, which could cause increase in cooling demand in these parts of the country.

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