A sharp drop in natural gas prices combined with a steady increase for NGL prices helped push nearly all NGL frac spread margins up this week. The lone exception was Conway isobutane, which was also the only NGL to experience a price decrease this week at either hub. Even at that, it fell less than 1%.

Natural gas prices dropped 7% at Conway and 9% at Mont Belvieu to $2.35 per million Btu as the mild winter temperatures lessened storage withdrawals below their average levels. The price decrease for NGL feedstocks resulted in margins largely improving.

The largest increase in margin was for Conway ethane, which has returned to a solidly positive status after hitting a negative margin two weeks ago following two very large increases in margin. Mont Belvieu ethane had the largest gain in margin at 20%.

While heavy NGL prices benefitted from increased crude prices this week, it was propane that had the second largest gain in margin at both hubs. The Conway increase of 11% was largely attributed to propane storage decreasing at the hub while the 7% increase at Mont Belvieu was evidence of the market correcting the price.

The theoretical NGL barrel price improved 6% to $46.96 per barrel (/bbl) with a 10% increase in margin to $38.35/bbl at Conway while the Mont Belvieu price roe 4% to $53.95/bbl with a 7% increase in margin to $45.34/bbl.

The most profitable NGL to make at both hubs was C5+ at $2.12 per gallon (/gal) at Conway and $2.19/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.50/gal at Conway and $1.72/gal at Mont Belvieu; butane at $1.42/gal at Conway and $1.62/gal at Mont Belvieu; propane at 84¢/gal at Conway and $1.01/gal at Mont Belvieu; and ethane at 14¢/gal at Conway and 34¢/gal at Mont Belvieu.

Natural gas in storage for the week of Feb. 24, the most recent data available from the Energy Information Administration, was down 82 billion cubic feet to 2.513 trillion cubic feet (Tcf) from 2.595 Tcf the previous week. This was 43% greater than the 1.757 Tcf figure posted the same time last year and 45% greater than the five-year average of 1.733 Tcf.

Once again the winter weather is expected to remain very mild, according to the National Weather Service’s forecast. At this rate the weather has been so warm in much of the U.S. this season that it would be apt to call it an extension of the fall or an early spring rather than winter. Next week’s forecast anticipates much warmer than normal weather in the Northeast, parts of New England and much of the Southeast, Gulf Coast and Midwest. Once again, the lone section of the country that is expected to experience cooler weather is the West Coast.

Contact the author, Frank Nieto, at fnieto@hartenergy.com.