Decreased Feedstock Prices Help Frac Spread Margins

Decreases in natural gas feedstock prices helped to increase natural gas liquid (NGL) frac spread margins or, in some cases, cushion the fall. Feedstock prices at Conway were down 6% while feedstock prices at Mont Belvieu were off 8% from last week.

The most improved margin at Mont Belvieu was for propane, which was up 15%. Iso-butane had a 14% improvement in margin at Conway for the largest increase at Kansas. Second largest increase at Conway was 11% for propane, while ethane had the second largest increase at Mont Belvieu at 10%.

Butane had the biggest decreases in margin at both hubs with a 10% drop at Conway and a 4% decrease at Mont Belvieu. Conway C5+ was the only other NGL to experience a reduced margin this week, as it was down 2%.

The most profitable NGL to make at Mont Belvieu was C5+ at US$1.23 per gallon (/gal) while iso-butane passed C5+ as having the largest frac spread at Conway this week at $1.36/gal. The second most profitable NGLs to make flip-flopped as iso-butane had a frac spread margin of $1.20/gal at Mont Belvieu and Conway C5+ had a margin of $1.20/gal.

The remaining frac spread margins were, in order, butane at $1.00/gal at Mont Belvieu and 92¢/gal at Conway; propane at 87¢gal at both Conway and Mont Belvieu; and ethane at 31¢/gal at Conway and 42¢/gal at Mont Belvieu.

Natural gas in storage for the week of January 22, the most recent data available from the U.S. Energy Information Administration, was down 86 billion cubic feet to 2.521 trillion cubic feet (Tcf) from 2.607 Tcf. This is 5% greater than the 2.401 Tcf storage level reported last year at the same time and 4% greater than the five-year average of 2.434 Tcf.

Thus far, the weather predictions for a harsh February in much of the country are looking correct, as the U.S. National Weather Service’s forecast for next week is calling for the cold weather that has begun the month to continue. This weather will be at its lowest temperatures in the region from the Mid-Atlantic region down to Florida. The cold spell is expected to run into the Gulf Coast as well as the Mid-West. Warmer winter weather is expected throughout much of the West Coast with normal winter temperatures in the rest of the country.

The Plastics Exchange reported that spot polyethylene prices rose 4¢ per pound (/lb) and spot polypropylene prices increased 2¢/lb due to planned and unplanned monomer outages last week. Further, it is expected that producers of the products are attempting to increase the price by up to 8¢/lb for polyethylene and up to 10¢/lb for polypropylene. – Frank Nieto