Despite winter temperatures that helped work off natural gas and propane storage overhangs, the theoretical Mont Belvieu natural gas liquids (NGL) barrel (bbl.) price is only up slightly from the same time last year.

The theoretical bbl. price decreased 2% to $35.98/bbl. at Mont Belvieu with a 2% drop in margin to $22.32/bbl., while the Conway price was down very slightly to $34.77/bbl. with a 3% increase in margin to $21.59/bbl.

This is surprising given the overall weakness in the NGL market in 2012 as well as the fact that prices in 2013 were outperforming them in the first-quarter. The lesson learned is that it’s going to take a full-year without major headwinds for the NGL and natural gas markets to improve.

Ethane continues to struggle due to unplanned cracker outages, which was further exacerbated by the explosion at Williams’ Geismar plant. The facility had been cracking about 30,000 bbl. per day of ethane, which could be made up with other plants cracking more volumes, according to En*Vantage.

“Downside risk for ethane is minimal at this point as ethane prices were trading below gas values before the explosion occurred. However, we see little upside for ethane over the next several months until the Williams cracker returns back to operations, possibly by the end of the year,” the company said in its Weekly Energy Report.

After Mont Belvieu ethane prices decreased last week following the Geismar plant incident, they rebounded with a 4% increase this week. The price of 25¢ per gallon (/gal) was the second-lowest since it was 24¢/gal the week of January 16. Conway ethane has been experienced a 12% increase to 20¢/gal after trading at 18¢/gal the previous three weeks.

Crude prices experienced increases to push West Texas Intermediate prices above $95/bbl. on improved data on the U.S. economy. Despite this positive, Conway isobutane was the only heavy NGL to experience an increase in value at either hub.

This price increase brought the price back up to the levels they had traded for the previous two weeks as it appears the market overreacted to lessened demand for alkylates last week and rebalanced this week. The $1.25/gal price at the hub was the highest since the final week of April. The Mont Belvieu price fell 2% to $1.15/gal, the lowest it has been since it was $1.14/gal the week of July 22, 2009. This was the second consecutive week that the Conway price was greater than the Mont Belvieu price.

Butane also fell 2% to $1.11/gal, its lowest level since the week of July 29, 2009 when it was $1.08/gal. Such price levels have been increasing export levels for the product out of the Gulf Coast as prices are considerably lower than in Europe. As this demand increases we should see some pick-up in the price in the coming weeks.

The Conway market doesn’t have this export capability and consequently has less optionality, which is reflected in its weaker price. Following a 3% drop, the Conway price closed the week at $1.05/gal, its lowest value since it was 96¢/gal the week of July 4, 2012.

There was also a downturn in propane prices as the Energy Information Administration (EIA) reported a larger-than-normal build-up in stocks. According to En*Vantage this build-up could be a result of new NGL pipelines coming online along with shipping bottlenecks for Gulf Coast propane exports as very large gas carriers were loaded to head to Asia, which has a longer ship time. The company continues to anticipate improved prices in the coming months as export demand levels increase along with several petrochemical plants returning to service. In the meantime propane prices continue to approach their lows for the year with the Mont Belvieu price falling 3% to 83¢/gal and the Conway price dropping 2% to 79¢/gal.

Pentanes-plus (C5+) prices also fell at similar levels at both hubs as the product continues to decouple from crude prices. The Mont Belvieu price decreased 3% to $1.98/gal, the first time it has been below the $2.00/gal threshold the week of October 3, 2012. The Conway price remained at a similar level to its Mont Belvieu counterpart following a 2% decrease to $1.95/gal, its lowest price since it was $1.94/gal the week of September 19, 2012.

However, the decrease in prices didn’t prevent C5+ from remaining the most profitable NGL to make at both hubs with the Mont Belvieu margin being $1.57/gal and the Conway margin being $1.55/gal. This was followed, in order, by isobutane at 78¢/gal at Mont Belvieu and 89¢/gal at Conway; butane at 72¢/gal at Mont Belvieu and 67¢/gal at Conway; propane at 48¢/gal at Mont Belvieu and 46¢/gal at Conway; and ethane at 0¢/gal at Mont Belvieu and negative 4¢/gal at Conway.

Natural gas storage levels continue to build at normal summer rates despite increased cooling demand. Power plant operators have been switching from gas to coal due to better economics. In response, natural gas prices have been decreasing, which could increase demand on the part of utilities.

According to the most recent data from the EIA, storage levels increased 95 billion cubic feet to 2.533 trillion cubic feet (Tcf) from 2.438 Tcf. This was 17% below the 3.055 Tcf level posted last year at the same time and 1% below the five-year average of 2.564 Tcf.

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

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