Natural gas liquids (NGL) prices were a mixed bag by the end of summer, as demand drivers for multiple products had yet to kick in. It is expected that the NGL market will improve in the fall and winter as heating, refining, industrial and export demand improves. Propane prices fell at both NGL hubs throughout September after the U.S. Energy Information Administration (EIA) released data late in the month showing that propane inventory increased at a larger-than-expected rate. Despite this development, most industry analysts anticipate stock levels to hit the five-year average of 63 million barrels (bbl.) before the end of the year as Targa Resources’ liquefied petroleum gas export terminal reaches full capacity after being brought online.
According to EIA data, propane stocks for the week ending September 27 rose by 1.6 million bbl., which was more than double what some forecasts anticipated. After an early run on propane to start September, farmers cut back on securing supplies. While it is still expected to be a very active crop-drying season, farmers wanted to get ahead of the increase in demand early.
The long-term outlook for ethane is also positive as more crackers are coming back online in the next few months, and there are no planned outages for the next six months. According to the EIA, ethane stocks dropped by nearly 2 million bbl. to 31.8 million bbl. in July, the same level reported the previous year for the same time period.
Given that these decreases occurred while some major crackers were offline, it portends well for the market the rest of the year. However, don’t expect these increases to result in a complete turnaround for the market as there is still a tremendous supply overhang to work off.
Butane and isobutane prices are reaching near-parity levels between the Conway, Kansas, and Mont Belvieu, Texas, NGL hubs as refiners switch to winter-grade gasoline. This has happened as Midcontinent prices have been outpacing their Gulf Coast counterparts for much of the second-half of 2013 as isomerization outages in the Midcontinent have been occurring at regular rates due to both operational difficulties and decreased local demand.
Pentanes-plus (C5+) prices staggered a bit in the fall as C5+ has increasingly had to compete with condensate production as both a diluent and gasoline blendstock. In addition, crude prices have been trading at a solid $100 per bbl. level as geopolitical tensions have cooled, which has had a negative impact on C5+ prices.
While crude prices have been dipping of late, gas prices increased throughout the month of September due to increased cooling demand and a drop in production as a result of flooding in Colorado, coupled with several facility outages in the Northeast.
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