Natural gas prices improved the week of September 11 as the U.S. Energy Information Administration (EIA) announced an inventory report that was lower than expected. This ran counter to crude prices, which trended down, and natural gas liquids (NGL), which were static.

Mont Belvieu gas prices rose 2% to $3.72 per million Btu (MMBtu), its highest level in six months. However, Conway prices fell 1% to $3.59 per MMBtu, its lowest price in two weeks. Looking ahead this trend appeared to reverse by September 18 when gas prices took a dip as the weather was expected to be mild, thus lowering cooling demand. In addition, crude prices improved as the EIA reported that crude supplies fell by more than 4 million barrels (bbl.) thanks to increased driving demand based on late summer or early fall vacations.

NGL prices should see some movements in the next few weeks as new midstream infrastructure is added in Mont Belvieu. According to En*Vantage, this will include 245,000 bbl. per day of new fractionation capacity along with the addition of the Texas Express Pipeline. This system, owned by Enterprise Products Partners, Anadarko Petroleum and Enbridge Energy Partners, will run 580 miles and transport NGLs from Skellytown, Texas to Mont Belvieu and have an initial capacity of approximately 280,000 bbl. per day that can be expanded to 400,000 bbl. per day.

“It’s doubtful that these assets will be at capacity the first day of operations. But, there will be considerably more NGL components that need to be marketed once the fractionators are completed which could put downward pressure on Mont Belvieu prices until they are flushed out of the system. So far, these NGL components could have been contained in the y-grade streams that have been stored at Mont Belvieu or trapped in the Rockies and Midcontinent basins until the Texas Express line has been completed,” the company said in its September 12 Energy Report .

The only NGL to experience any sort of tangible movement was ethane, which decreased at both hubs on the back of last week’s price drop for propane, with which it has a close relationship. The Conway price fell 5% to 20¢ per gallon (gal.), its lowest price since it was also 20¢ per gal. the week of July 10. The Mont Belvieu price fell at a smaller rate of 1% to 25¢ per gal., which is the same rate at which it has been trading for the past month.

Propane prices decreased slightly at both hubs after last week’s surprising decrease. The Mont Belvieu price decreased to $1.13 per gal., which is still at the high end of the price spectrum in nearly 18 months. The Conway price fell to $1.10 per gal., its lowest price in a month.

Traders were surprised by the EIA’s announcement that propane inventories had grown the first week of September, which ran counter to expectations that with increased export and crop-drying demand that inventories would continue to be worked off. It is expected that this was a short-term blip in the market as most analysts anticipate that inventories will reach their five-year average by the end of the year.

Heavy NGL prices followed this same trend although as the new fractionation capacity is brought online, they could suffer more than their lighter counterparts until the market is balanced out, according to En*Vantage. Butane and isobutane price differentials are already slim between the two hubs, which is unusual, and could continue on a short-term basis.

Overall, the theoretical NGL bbl. price was down slightly to $43 per bbl. at Mont Belvieu with a 1% drop in margin to $29.41 per bbl. The Conway price fell 1% to $41.57 per bbl. with a very small drop in margin to $28.45 per bbl.

While NGL prices held firm, frac spread margins were a mixed bag due to the opposite movements of gas prices at the two hubs. Generally speaking, Conway margins were improved while Mont Belvieu margins fell across the board.

The most profitable NGL to make at both hubs remained C5+ at $1.75 per gal. at Conway and $1.82 per gal. at Mont Belvieu. This was followed, in order, by isobutane at 99¢ per gal. at Conway and 98¢ per gal. at Mont Belvieu; butane at 94¢ per gal. at Conway and 95¢ per gal. at Mont Belvieu; propane at 78¢ per gal. at Conway and Mont Belvieu; and ethane at negative 4¢ per gal. at Conway and nil at Mont Belvieu.

The late heat wave that ran through the Northeast last week helped keep cooling demand high late in the season, which resulted in a smaller-than-normal storage build of just 46 billion cubic feet to 3.299 trillion cubic feet (Tcf) for the week of September 13, the most recent data available from the EIA. This was 5% below the figure of 3.486 Tcf posted last year at the same time and 1% above the five-year average of 3.281 Tcf.

Cooling demand is expected to remain higher-than-normal for late September, according to the most recent forecast from the National Weather Service. The forecast anticipates warmer temperatures throughout much of the country, including the East Coast, Midwest, Gulf Coast and part of the Southwest. This will be balanced somewhat by cooler-than-normal temperatures along the West Coast.

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