(Note: Beginning this week, Midstream Monitor is combining the weekly Frac Spread and NGL Price columns to provide readers with a better context of the market. We will continue to provide separate charts for both along with the information previously found in the separate columns.)
Natural gas liquids (NGL) prices and frac spread margins made gains the week of Feb. 29 as prices continued to stabilize and rebalance. Frac spread margins also benefitted from the continued depression of natural gas prices.
Mont Belvieu natural gas prices dropped 6% to $2.22 per million Btu (/MMBtu) while Conway prices fell 4% to $2.26/MMBtu. This resulted in the margins for the theoretical NGL barrel at both hubs to improve with the Mont Belvieu margin up 3% to $46.47 per barrel (/bbl) and the Conway margin up 6% to $40.52/bbl.
Isobutane had the largest price and margin gains at both hubs, thanks to several alkylation units this week. The Mont Belvieu price rose 6% to $2.08 per gallon (/gal), its highest price since it was $2.13/gal the week of Jan. 11. This resulted in an 8% gain in margin. Conway isobutane had even larger gains as the price rose 10% to $1.91/gal, its highest price since it was $1.95/gal the week of Jan. 5. This resulted in a 12% margin improvement.
Conway ethane had the largest gain in margin at 21% due to a 8% increase in price to 32¢/gal. This was the hub’s highest price since it was 34¢/gal the week of Nov. 23, 2011. It appears that these increases are a result of market corrections more than any increased demand, especially given that ONEOK’s fractionator in Medford, Okla. was offline for much of the week following a blowout at a nearby propane storage well. The facility was brought back online on March 7 and shouldn’t have any long-term impact on prices or margins.
Mont Belvieu ethane prices were relatively quiet this week as they gained 1% to 50¢/gal, the highest price at the hub since it was 55¢/gal the week of Jan. 31. This resulted in a 3% gain in margin. The ethane market should experience a significant uptick in June once ethylene plant and fractionator turnarounds are completed.
The lone NGL to experience a price decrease this week at either hub was Mont Belvieu propane, which dropped 1% $1.22/gal. This is largely the same price it has been trading at for the past month though as the market has been relatively quiet due to limited heating demand. Export demand may be experiencing an improvement in the coming weeks based on forward prices, which should support prices and demand. Despite the price decrease, the margin was actually up slightly.
Conway propane improved 2% to $1.07/gal as the market continued to rebalance after the price fell below $1.00/gal for several weeks two weeks ago. The margin rose 3% at Conway as a result.
The most profitable NGL to make at both hubs was C5+, which continued to benefit from strong crude prices. The frac spread for the product at Conway was $2.19/gal and $2.23/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.68/gal at Conway and $1.86/gal at Mont Belvieu; butane at $1.50/gal at Conway and $1.67/gal at Mont Belvieu; propane at 86¢/gal at Conway and $1.02/gal at Mont Belvieu; and ethane at 17¢/gal at Conway and 35¢/gal at Mont Belvieu.
Natural gas in storage for the week of March 2, the most recent data available from the Energy Information Administration, decreased 80 billion cubic feet to 2.433 trillion cubic feet (Tcf) from 2.513 Tcf the previous week. This was 44% higher than the 1.694 Tcf figure posted last year at the same time and 48% higher than the five-year average of 1.641 Tcf.
Gas storage withdrawals are likely to remain sluggish given the weather outlook for next week. According to the National Weather Service’s forecast for the week, it is highly unlikely that heating demand will increase as the bulk of the country is expected to experience warmer than normal March temperatures. At this rate, it may be worth considering the cooling demand increases rather than heating demand. The warmest weather is expected along the East Coast and throughout the Midwest. Once again, only the West Coast is expected to experience normal or cooler than normal temperatures.
Contact the author, Frank Nieto, at fnieto@hartenergy.com.
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