The month of March was very good for natural gas producers, public utilities and pipeline operators, but it saw a downturn in heavy natural gas liquid (NGL) prices.

Both natural gas and light NGL prices benefited from increased heating and export demand. Fall and winter arrived late, but they had a huge impact as a sustained cold front lasted just as spring arrived.

This caused natural gas prices to increase 15% at Conway in the month of March to $3.97 per million Btu (/MMBtu) and the Mont Belvieu price rose 17% to $4.03/MMBtu. The week of March 29 saw storage levels finally fall below their five-year average for the first time since September 16, 2011. According to the Energy Information Administration, the storage level fell to 1.687 trillion cubic feet (Tcf), which was 2% below the five-year average of 1.724 Tcf.

This heating demand also resulted in propane prices saw significant gains throughout the month as they rose 13% to close the month at 96¢ per gallon (/gal) at Mont Belvieu and increased 10% to close at 89¢/gal at Conway.

While heating demand didn’t have a noticeable impact on ethane sales, the product experienced solid price gains in March. Consistent rejection at most hubs finally resulted in supply and demand fundamentals reaching near equilibrium. In addition, ethane benefitted from having crackers online in the start of 2013 unlike the situation in 2012, when many crackers were offline due to turnarounds and expansions.

According to Wells Fargo Securities, ethane supplies in 2013 are expected to be 1.191 million barrels (bbl.) per day with approximately the same level of demand. By comparison, 2012 supplies were estimated to be 1.007 million bbl. per day with only 985 million bbl. per day of demand.

Ethane prices improved 9% at Mont Belvieu from an average of 26¢/gal in February to an average of 28¢/gal in March. The Conway price for E-P mix increased at a slower rate of 5% from an average of 24¢/gal in February to an average of 25¢/gal in March.

Heavy NGL prices took a downturn in the month due to refiners switching from winter-grade gasoline to summer-grade gasoline along with stagnant crude prices. However, C5+ remained the most profitable NGL to make at both hubs in the month at $1.79/gal at Conway and $1.71/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.06/gal at Conway and $1.07/gal at Mont Belvieu; butane at 94¢/gal at Conway and $1.02/gal at Mont Belvieu; propane at 54¢/gal at Conway and 59¢/gal at Mont Belvieu; and ethane at 1¢/gal at Conway and 4¢/gal at Mont Belvieu.

Contact the author, Frank Nieto, at fnieto@hartenergy.com

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