Finally, the NGL price outlook resembles a half-full glass. That’s because:
- The price of West Texas Intermediate (WTI) has tumbled to about 14% below what it was less than two months ago when it surged past $53 per barrel (bbl);
- Last week’s natural gas price decline was the sharpest since the November U.S. presidential election; and
- All NGL prices tracked by Hart Energy fell in the past week, with margins narrower for all but one: ethane at the Conway, Kan., hub.
Perhaps that glass should be half-full of 12-year-old Aberfeldy, a single malt scotch whisky mentioned by some to be an excellent choice for a Father’s Day gift. But trust the economics before rushing to drown sorrows.
U.S. crude oil inventories had been declining until the 3.3 MMbbl build of the week ending June 2, noted En*Vantage, but supplies have still dipped below 30 days, as measured by the U.S. Energy Information Administration (EIA). At this time in 2016, supplies were near 31 days. Days of supply for propane are about 18% below what they were in 2016 at this time, and 29% under 2015 levels.
En*Vantage admits that WTI could drop to $45/bbl just because bearish sentiment weighs on traders but insists that fundamentals justify a price above $50.
But not this week—average NGL prices, tethered to crude oil and natural gas, took a beating. The hypothetical NGL barrel fell 5.5% at Mont Belvieu, Texas, and 4.8% at Conway.
Mont Belvieu’s barrel hadn’t slipped below $24 since late March. Leading the declines were propane’s 6.7% falloffs at both hubs, which dragged Conway’s price back below 60 cents per gallon (gal) after three straight weeks. Ethane slid 5.7% at Mont Belvieu and 2.8% at Conway.
Butane fell to its lowest average level in 10 weeks at Mont Belvieu and barely clung to 70 cents/gal at Conway. Isobutane dropped below 73 cents/gal at Mont Belvieu to its lowest point since mid-September.
Compared to the same time a year ago, the barrel prices were up 13.3% at Mont Belvieu and 13.2% at Conway. Ethane was 11.4% higher at Mont Belvieu and 15.3% at Conway. Despite its rough week, propane was nevertheless 25.6% above 2016’s price at Mont Belvieu and 26.4% higher at Conway.
Butane’s 2017 advantage was 14.2% at Mont Belvieu, but the 2016 price took a hit that week and was primed for a bounce. At Conway, butane was 15.3% higher than the same time in 2016. Isobutane was up 11.4% at Mont Belvieu and 11.5% at Conway. The 2017 advantages for C5+ were only 4.2% at Mont Belvieu and 1.6% at Conway.
Storage of natural gas in the Lower 48 increased by 106 billion cubic feet (Bcf) in the week ended June 2, the EIA reported. The increase, above the Bloomberg consensus of 100 Bcf, resulted in a total of 2.631 Tcf. The figure is 11.2% below the 2.963 Tcf figure at the same time in 2016 and 9.9% above the five-year average of 2.394 Tcf.
Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.
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