As fans of “Game of Thrones” know, the Stark family motto is “winter is coming.” On the TV show, as well as in the novels, the motto is a reminder to be prepared for the worst. Because the family’s stronghold is to the north of the fictitious land in the series, this warning frequently refers to the extreme cold on the way.
By contrast, that same motto serves as a reminder to natural gas and propane producers as well as midstream operators that better days are ahead: The shoulder season is ending and will bring colder temperatures and increased natural gas demand from very significant markets for home heating.
Only fervent football fans and children awaiting a visit from Santa look forward to the fall and winter seasons more than hy-drocarbon producers and midstream operators. A temperate summer failed to deliver a significant uptick in cooling demand necessary to work off natural gas storage, and crude continued to stumble at its lowest price levels in years without much hope of a quick turnaround.
While natural gas storage levels hover around the five-year av-erage, improved drilling efficiency is causing fears that a price drop is around the corner in order to prevent storage from reaching capacity. The NGL market has ex-perienced a similar situation with widespread ethane rejection for the past few years. Record propane storage levels this summer are causing a severe price downturn. Heavy NGL prices are also suffering because of a crude market that is over-supplied and experiencing large storage levels.
Production hasn’t decreased quickly enough for gas, liquids or crude—and storage has built to the point where it may take a strong surge in demand to effectively rebalance these markets. This is especially true for propane, which is ex-pected to have a ceiling of 50 cents per gallon for the upcoming heating season.
There is good news amid this negativity and that’s in the form of ethane and West Texas In-termediate (WTI) crude. The industry’s rejection policy toward ethane is beginning to pay off and it is expected that prices will begin to turn to a marginally positive state before the end of the year, while crude demand is increasing thanks to low prices. Though neither product can be ex-pected to reach highs from the past 10 years, these markets may be slowly recovering.
This situation is also resulting in improved margins at both Conway, Kan., and Mont Belvieu, Texas, NGL hubs, with gas prices hovering in the$2.60 per million Btu range. While these margins may not be the strongest, they should continue to improve as winter gets closer.

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