The fortunes of natural gas producers, public utilities and pipeline operators turned very good at the end of the first quarter, but March saw a downturn in heavy natural gas liquid (NGL) prices. Both 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 spell lasted as spring arrived, at least officially.

This caused gas prices to increase 15% at the Conway, Kansas, hub in March to $3.97 per million Btu (MMBtu) and the Mont Belvieu, Texas, hub price rose 17% to $4.03 per MMBtu. The final week of March saw storage levels finally fall below a five-year average for the first time since September 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 significant propane price gains as they rose 11% to close the month at 96¢ per gallon at Mont Belvieu and increased 12% to close at 90¢ per gallon at Conway.

Ethane sales experienced solid price gains. Consistent rejection at most hubs finally resulted in supply and demand fundamentals reaching near equilibrium. In addition, ethane benefited from having crackers online at the start of 2013 unlike 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¢ per gallon in February to an average of 28¢ per gallon. The Conway price for ethane-propane mix increased at a slower rate of 5% from an average of 24¢ per gallon in February to an average of 25¢.

Heavy NGL prices took a downturn due to refiners switching from winter-grade gasoline to summer-grade gasoline along with stagnant crude prices. This resulted in the average price of butane, isobutane and C5+ losing more than 20¢ per gallon each at Mont Belvieu and Conway. The Midcontinent experienced an increase in demand for C5+ because of a shortage in the market as the dynamics have changed.

When ethane is being fully rejected, the NGL barrel composition changes with the amount of ethane increasing by 3% and C5+ decreasing. Consequently, during the first three months of 2013 when ethane was not being rejected as widespread as throughout much of 2012, C5+ volumes decreased. The market should rebalance as ethane has once again entered a period of widespread rejection this spring.

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