Heat Wave Causes Smaller Gas Storage Injection

Frac spread margins continued to largely improve at both hubs the week of July 27, with only C5+ and Conway isobutane experiencing decreases in margin due to lessened demand for both products.

The biggest gain in margin for the week was for Mont Belvieu ethane, which improved 6%. This was followed by propane and butane at the hub, which each experienced 4% gains in margin from the prior week.

Ethane and propane had the strongest improvements in margin at Conway as they increased 2% from the previous week. These improvements in the Midcontinent occurred despite stagnant NGL prices, but were supported by a 2% drop in natural gas feedstock prices to $4.20 per million Btu (/MMBtu) at the hub. Similarly the Mont Belvieu margins were supported by both improved NGL prices as well as a 3% drop in natural gas feedstock prices to $4.25/MMBtu.

The biggest drop in margin at either hub was for Conway isobutane and C5+, which were down 2% each the week of July 27. Mont Belvieu C5+ was the lone NGL to drop in margin at the hub as it was down 1% from the previous week.

Overall, the theoretical NGL barrel price was stronger at Mont Belvieu as it rose 1% to $63.64 per barrel (/bbl) with a 2% gain in margin to $48.11/bbl. The Conway theoretical barrel price dropped 1% to $55.41/bbl with a very slight drop in margin to $40.07/bbl.

The most profitable NGL to make at both hubs remained C5+ at $1.99 per gallon (/gal) at Mont Belvieu and $1.76/gal at Conway. This was followed, in order, by isobutane at $1.68/gal at Mont Belvieu and $1.54/gal at Conway; butane at $1.49/gal at Mont Belvieu and $1.25/gal at Conway; propane at $1.17/gal at Mont Belvieu and $1.06/gal at Conway; and ethane at 54¢/gal at Mont Belvieu and 28¢/gal at Conway.

Natural gas in storage for the week of July 29, the most recent data available from the Energy Information Administration, increased only 44 billion cubic feet due to the extreme heat wave experienced throughout most of the country. This storage injection increased the storage level to 2.758 trillion cubic feet (Tcf) from 2.714 Tcf the previous week. This was 6% below the storage level of 2.944 Tcf reported last year at the same time and 2% below the five-year average of 2.826 Tcf.

The natural gas injection level should increase in the coming weeks as the National Weather Service’s forecast for the week of Aug. 9 anticipates the heat wave breaking in the Northeast. Indeed, the forecast is calling for cooler than normal temperatures throughout the Northeast and into the Upper Midwest. However, the heat is not expected to abate in the southern portion of the United States.