Frac Spread: Yes, Virginia, There Is A Price Slump

Ethane at Mont Belvieu, Texas, slumped to a four-month low last week and, despite a very slight rise in the price of natural gas, saw its margin slide into the negative. That’s a 45.1% falloff from the same week in 2018 and 16% in the last two weeks alone.

“Simply, ethane markets are oversupplied, leaving ethane to bob up and down with the movements in natural gas prices,” lamented EnVantage Inc. analysts in a recent report.

“For ethane to have any chance to work down a mountain of excess supplies, all existing plants and new crackers slated to start-up this year need to be near full operations, which may be asking a lot since the U.S. ethylene industry has found it very difficult in maintaining 90% of its existing nameplate capacity online at any time,” they wrote. “Plus, petrochemical companies have struggled to bring new capacity online in a timely fashion.”