Mont Belvieu ethane prices improved alongside natural gas prices as a result of an increase in late summer cooling demand. However, gains were small and frac spread margins continue to be challenged as they remained firmly negative for the final week of August.
A sluggish summer for commodity prices is fast drawing to a close and producers can only hope that a repeat of last winter will spur demand and increase prices for propane and natural gas.
As the summer of 2014 draws to a close, NGL prices continued to return to levels from last summer with the only real discrepancies being higher Conway propane prices and lower Mont Belvieu isobutane prices this year.
As we enter August, the winter of 2014 is a distant memory along with the gas shortages and high prices that it brought with it. The first week of August 2014 looks an awful lot like the same time last year with one key difference: even worse NGL prices and improved gas prices. It’s the worst of both worlds for NGL producers as frac spread margins are now worse off than a year ago.
The NGL market is experiencing a down period this summer as infrastructure outages, construction delays and cool weather have combined to make this a lost season.
As July draws to a close, ethane prices remain in free fall with major headwinds working against them, primarily in the form of plant outages that have severely reduced domestic cracking capacity.
Ethane prices had been expected to begin their long-awaited improvement this summer, but that progress appears to be getting stunted once again.
Ethane prices had the largest decrease the first full week of July as it remains closely related to gas prices, which tumbled this week. Ethane was also hurt by the continued outage of several crackers undergoing expansions or maintenance.
NGL prices were largely stagnant, with a slight trend down at the end of June as they followed losses for natural gas price and crude. Overall, NGL prices largely remained flat compared to the levels posted in the second quarter.
There were notable price increases for butane and isobutane, which are benefitting from increased crude prices. In addition, propane prices rose at both Mont Belvieu and Conway as the uncertainty in Iraq and its hydrocarbon production is also causing a mild run-up in its value.
NGL prices rose across the board at both hubs, aside from Conway isobutane, which continued to plummet. The full reasoning behind the high premium and the sharp drop in value of Midcontinent isobutane prices has yet to be determined.
The Conway isobutane price spike came to an abrupt end the first week of June with a 14% loss in value that saw its premium over Mont Belvieu prices get slashed in half. Capacity in the region is returning, which is providing an outlet for the product.