July’s frac spread margins for natural gas liquids (NGL) were largely down compared to the previous month, with the notable exception of ethane, as ethane demand from the petrochemical industry remained high due to strong economics.
Ethane-cracking levels remained very high with plants operating at 96% utilization for much of July. In fact, En*Vantage reported that several petrochemical companies sold ethane out of their stocks in order to stop ethane prices from going higher.
“NGL prices remain extremely firm. We are not surprised by the strength in ethane prices as our balances indicate that ethane supplies are tightening in light of record cracking demand," wrote En*Vantage in its Weekly Energy Report. “Overall, the rest of the NGL barrel is maintaining very strong price relationships to crude, although there continues to be some concerns about the strong build we are seeing in propane stocks.”
According to the report, ethane cracking is at record levels, and prices for the month of July have been the strongest since September 2008.
“By the end of August, we expect ethane inventories to be at 18.7 million barrels with days of supply at 19 days. If our forecast is correct, this would indicate a reasonably tight ethane market,” the report stated.
Meanwhile, the ethane market tightened to such a degree that the Conway market showed the greatest growth in margin for the month, with a 42% increase, despite having limited demand or capacity in the region.
