Ethane struggled, both in price and in the spread, at Mont Belvieu, Texas, last week but the rest of the NGL recorded strong results on average, especially in light of stern warnings from the U.S. Centers for Disease Control (CDC) to prepare for an outbreak of COVID-19.
However, the warning on Feb. 25 from Dr. Nancy Messonnier, the director of the CDC’s National Center for Immunization and Respiratory Diseases shook global markets, dragging WTI back below $50 per barrel (bbl) and leaving the U.S. benchmark Henry Hub price of natural gas to languish at around $1.85 per million British thermal units (MMBtu), about 10 cents lower than at the start of the week.
And as the virus continued to spread across Europe, the Middle East and Latin America, so did the dread in the markets. WTI slumped below $49/bbl on Feb. 26, Henry Hub slipped to $1.821/MMBtu and while the Dow Jones industrial average held relatively steady, the S&P Oil & Gas index suffered a hit of almost 5%.
The slide accelerated on Feb. 27, with WTI dropping more than $2/bbl, or 4.3%, by midmorning on news that Asian demand growth would experience a significant slowdown because of COVID-19. Brent declined $1.74/bbl or 3.3%.
Feb. 25 was a tough day for the butanes and natural gasoline at Mont Belvieu. Normal butane, which closed at 68 cents per gallon (gal) on Feb. 21, dropped to 61.5 cents/gal on Feb. 24 and to 58 cents/gal on Feb. 25. On average, the gain was 6 cents/gal over the previous week, but the midweek highs were surrendered by the end of the tracking period. The average margin for the week was about 15% higher.
Isobutane also closed at 68 cents/gal on Feb. 21 but fell to 62 cents/gal by Feb. 25. Natural gasoline took a one-day hit at Mont Belvieu from $1.11/gal on Feb. 24 to $1.03/gal on Feb. 25.
Ethane’s struggles will likely continue, EnVantage Inc. said, with high storage levels and intense competition from propane as a cracker feedstock.
“The oversupply of ethane will make it difficult for ethane prices to differentiate from natural gas prices,” the analysts said. “Expect ethane to struggle around 15 cents/gal, weakening in the spring.”
The virus has forced China’s petrochemical industry to cut back harshly, EnVantage said. Since mid-2019, ethane exports from Morgan’s Point in the Houston Ship Channel to China have averaged about 23,000 bbl/d. EnVantage, which tracks tankers, saw that JS Ineos Invention, loaded with ethane and bound for China via the Panama Canal, was diverted to Norway. On Feb. 26, it was off the coast of Scotland.
Henry Hub natural gas has not closed above $2/MMBtu since Jan. 17. The U.S. Energy Information Administration (EIA) forecast on Feb. 24 that the winter heating season will end with 1.935 trillion cubic feet (Tcf) of natural gas in storage, or about 12% above the five-year average.
The EIA attributed the high level to strong production and modest withdrawals through a mild winter. The upshot is that the upcoming injection season could set a record with a close of 4.029 Tcf.
In the week ended Feb. 21, storage of natural gas in the Lower 48 experienced a decrease of 143 billion cubic feet (Bcf), the EIA reported, compared to the Investing.com expectation of a 151 Bcf reduction. The EIA figure resulted in a total of 2.2 Tcf. That is 40.8% above the 1.563 Tcf figure at the same time in 2019 and 8.9% above the five-year average of 2.021 Tcf.
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