Energy commodity prices dipped this week as consumer demand remains down during the shoulder season. Natural gas prices experienced very large price decreases with natural gas liquid (NGL) prices falling at a slower rate at both hubs the first week of May.
The Conway natural gas price fell 7% to $3.82 per million Btu (/MMBtu) while the Mont Belvieu price dropped 6% to $3.97/MMBtu. These were the lowest prices for natural gas in more than a month, but remain among the highest prices in several years.
Normally decreased natural gas prices have a positive impact on NGL frac spread margins, but this week NGL prices dropped at both hubs.
The biggest decreases were for heavy NGLs, which was surprising considering that West Texas Intermediate crude oil prices improved throughout the week. However, heavy NGLs are struggling due to lessened gasoline demand combined with a switch to summer-grade gasoline.
Indeed, isobutane had the largest price decreases of any NGL during the week, as it fell 9% to $1.15 per gallon (/gal) at Conway and 6% to $1.25/gal. Both prices were the lowest at each hub since they were the same level the week of September 30, 2009.
These decreases left the differential between butane and isobutane prices very slim as butane prices fell 4% at both hubs. The differential at Conway was largely non-existent, as the price was also $1.15/gal, its lowest price since it was $1.08/gal the week of August 1, 2012. The Mont Belvieu price of $1.23/gal was the lowest at the hub since it was $1.20/gal the week of June 27, 2012. Butane prices have more support than isobutane prices at this time of year due to its attractiveness as an ethylene feedstock as well as an export product.
For the tenth consecutive week Conway C5+ prices were greater than their Mont Belvieu counterparts, running counter-to-normal pricing expectations. However, the gap is closing fast as the Mont Belvieu price was higher on a daily basis the majority of the week. The average price fell 6% for the week at Conway to $2.07/gal and 2% to $2.06/gal at Mont Belvieu.
Propane prices largely held firm this week as export demand remains strong coming off a winter with strong heating demand that caused stock levels to fall below their five-year low. The Mont Belvieu price was down 2% to 94¢/gal, which is within the average for the past month. The Conway price fell 1% to 87¢/gal, its second-highest price in five weeks. The differential between Conway and Mont Belvieu propane prices are expected to narrow in the third-quarter when new Y-grade pipelines are connected to the hubs.
Although European demand for liquefied petroleum gas (LPG) has been decreasing, there is still strong worldwide demand, especially in Latin America for LPG to support propane prices. This could change if the gap with European prices narrows drastically.
A Morgan Stanley North America Insight research report on NGL dynamics released on May 6 stated that there are two possible scenarios for U.S. propane prices going forward. The below-consensus outcome is that increased LPG exports could overwhelm the international market and cause propane and ethane to trade at parity. The above-consensus outcome is that international LPG remains very strong and pushes U.S. propane prices to international levels, minus transportation costs.
Conway ethane prices continued to rebound the first week of May after hitting their floor two weeks ago. The price rose 2% to 22¢/gal, their highest level in five weeks. The Mont Belvieu price moved in the opposite direction falling 2% to 29¢/gal.
The theoretical NGL barrel (bbl.) price fell at both hubs with the Conway price moving down 4% to $37.22/bbl. with a 2% drop in margin to $23.27/bbl and the Mont Belvieu price falling 2% to $39.45/bbl. with a very slight increase in margin to $24.95/bbl.
The most profitable NGL to make at both hubs remained C5+ at $1.65/gal at Conway and $1.62/gal at Mont Belvieu. This was followed, in order, by isobutane at 77¢/gal at Conway and 85¢/gal at Mont Belvieu; butane at 76¢/gal at Conway and 82¢/gal at Mont Belvieu; propane at 52¢/gal at Conway and 58¢/gal at Mont Belvieu; and ethane at negative 3¢/gal at Conway and 3¢/gal at Mont Belvieu.
Natural gas storage levels reached their normal injection rates for early spring the week of May 3 as the Energy Information Administration reported that there was an 88 billion- cubic-feet injection. This increased storage levels to 1.865 trillion cubic feet (Tcf) from 1.777 Tcf the previous week. This was 28% below the storage level of 2.602 Tcf reported last year at the same time and 5% below the five-year average of 1.964 Tcf.
It is likely that storage injections will remain at a normalized rate the second week of May as the National Weather Service’s forecast anticipates normal temperatures throughout the Northeast and much of the Midwest. There should be an increase in cooling demand from the West Coast and Rockies, which are expected to experience hotter-than-normal temperatures. However, this is unlikely to cause a major dent in nationwide demand levels.
Contact the author, Frank Nieto, at fnieto@hartenergy.com
Recommended Reading
Quantum Backs Tug Hill Team in New E&P Vickery Energy
2024-09-24 - Quantum Capital Group is backing the executives behind Tug Hill Operating, which sold to EQT Corp. for $5.2 billion, in a new Appalachian Basin company Vickery Energy Partners.
Utica’s Encino Boasts Four Pillars to Claim Top Appalachian Oil Producer
2024-11-08 - Encino’s aggressive expansion in the Utica shale has not only reshaped its business, but also set new benchmarks for operational excellence in the sector.
Now, the Uinta: Drillers are Taking Utah’s Oily Stacked Pay Horizontal, at Last
2024-10-04 - Recently unconstrained by new rail capacity, operators are now putting laterals into the oily, western side of this long-producing basin that comes with little associated gas and little water, making it compete with the Permian Basin.
Northern’s O’Grady: Most of ‘Best’ Acres ‘Already Been Bought’
2024-10-24 - Adding new-well inventory going forward will require “exploration or other creative measures,” said Nick O’Grady, whose Northern Oil and Gas holds interests in 10,000 Lower 48 wells.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.