Frac Spread: Wider Margins, Higher Prices For NGL

NGL margins, except for ethane, widened in the past week at both Mont Belvieu, Texas, and Conway, Kan., hubs.

The hypothetical NGL barrel also returned to its highest price level in five weeks at both hubs. Mont Belvieu’s barrel is 16.2% higher than it was a year ago. Conway’s barrel is 14.3% higher.

U.S. ethane demand is back to 1.3 million barrels per day (MMbbl/d), En*Vantage estimated, with total demand including exports expected to reach 1.43 MMbbl/d in May. The startup of Dow Chemical’s Freeport, Texas, cracker in the third quarter will add as much as 90 Mbbl/d to that.

Cargo cancellations are not hindering the upward price trends of propane at either hub. At Mont Belvieu, the price rose 4.7% in the past week while at Conway, the rise was 4.5%. Compared to a year ago, the Mont Belvieu price is up 22.5% and the Conway price is 23.6% higher.

Reaching back another 12 months, the most recent weekly Mont Belvieu average prices is 59.1% above what it was at this time in 2015. Feeling nostalgic for pre-crash prices? At this time in 2014, propane sold for about $1.05 a gallon (gal), or 58.3% higher than what it sells for now. At Conway, propane’s price was 64% higher in May 2014 than it was last week.

En*Vantage continues to keep an eye on U.S. propane inventories, which show days of supply at only 23.4, compared to 43.5 at this time a year ago. The analysts expect inventories to land between 60 MMbbl and 65 MMbbl at the end of the injection season, which could be troublesome if the 2017-2018 winter presents normal to colder-than-normal average temperatures.

AccuWeather meteorologists predict a lower-than-average number of tropical storms and hurricanes for the 2017 season which begins June 1 and ends Nov. 30, with three hurricanes likely to strike the U.S. However, warmer-than-average temperatures in the Atlantic could delay El Niño, which would result in a greater number of storms overall.

Storage of natural gas in the Lower 48 increased by 75 billion cubic feet (Bcf) in the week ended May 19, the U.S. Energy Information Administration reported. The increase, above the Bloomberg consensus of 71 Bcf, resulted in a total of 2.444 Tcf. The figure is 13.2% below the 2.815 Tcf figure at the same time in 2016 and 10.9% above the five-year average of 2.203 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.