As temperatures rose across the U.S. the week of March 9, hydrocarbon prices began to level off. While prices seemed to have plateaued in February, it is possible that prices will continue to decrease as the spring shoulder season begins over the next few weeks.

Natural gas prices experienced fairly large decreases at both Conway and Mont Belvieu. The price in the Midcontinent fell 6% to $2.50 per million Btu (MMBtu) while the Gulf Coast price was down 12% to $2.71/MMBtu.

Since gas prices remained challenged even in the midst of a frigid winter, there is feeling that a greater downturn can be expected in the second and third quarters of this year in an effort to encourage demand. Barclays Capital lowered its 2015 forecast from $4.01/MMBtu to $2.75/MMBtu due to the prospect of less coal-fired power plants being retired along with an expected increase in gas production.

“Excess supply continues to steer the market lower. We expect natural gas prices to fall below $2.50 in Q2 2015, ensuring that almost 6 billion cubic feet per day (Bcf/d) of natural gas is used for power that storage levels do not overshoot. Gas should thus be a more competitive alternative to cheap coal,” the investment firm said in its March 10 Natural Gas Kaleidoscope.

Deteriorating gas prices are helping frac spread margins improve, but gains were limited by NGL price downturns related to West Texas Intermediate (WTI) crude prices falling below $50 per barrel (bbl). Prices should begin to improve as the summer driving season begins, which would lessen fears of WTI prices falling below $40/bbl. Producers have been delaying well completions while they continue to drill wells, which should slow the storage buildup and balance the market.

Heavy NGL prices faced several other headwinds, most notably in the case of butane. Not only is butane demand decreasing with the end of the winter gasoline-blending season, but the LPG export market also dried up for several days the last few weeks. The Houston Ship Channel was closed last week as a result of fog and this week due to a collision involving two ships. The seaport reopened on March 12.

Butane prices fell 6% at Conway to 54 cents per gallon (gal) and 4% at Mont Belvieu to 58 cents/gal, their lowest prices in five weeks. Butane’s sister product, isobutane also fell in value at both hubs with a 4% drop to 84 cents/gal at Conway and a 5% drop to 70 cents/gal at Mont Belvieu, both of which were also the lowest at the hub in five weeks.

Propane prices were also impacted by the Houston Ship Channel closures as export shipments were reduced along the Gulf Coast. Additionally, exports are constrained in the Atlantic Basin as several contracted cargoes were cancelled for April liftings because of a lack of VLGC (very large gas carrier) ships in the region, according to En*Vantage. This scarcity is tied to increased trading to the Far East, which is lengthening the return time for vessels, the company said in its Weekly Energy Report for March 12. These headwinds caused prices to fall 4% to 58 cents/gal at Mont Belvieu and 6% to 54 cents/gal at Conway.

Mont Belvieu and Conway prices were just about on par with each other at 18 cents/gal as demand faltered with the start of a full week of trading in March. Ethane prices have been supported the last week of January and February by traders caught short at the end of the month. The one positive to take from ethane is that with the decrease in gas prices, margins were hypothetically positive at both hubs.

Overall the theoretical bbl price was down 5% at Conway to $22.52/bbl with a 4% decrease in margin to $13.38/bbl. The Mont Belvieu bbl price fell 4% to $23.28/bbl with a 2% gain in margin to $13.38/bbl.

The most profitable NGL to make at both hubs was C5+ at 83 cents/gal at Conway and 88 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 59 cents/gal at Conway and 43 cents/gal at Mont Belvieu; butane at 39 cents/gal at Conway and 41 cents/gal at Mont Belvieu; propane at 31 cents/gal at Conway and 34 cents/gal at Mont Belvieu; and ethane at 2 cents/gal at Conway and 1 cent/gal at Mont Belvieu.

The U.S. Energy Information Administration reported that natural gas storage levels were down 198 Bcf to 1.512 trillion cubic feet (Tcf) the week of March 6, which included the several days of very cold temperatures in the Midwest and along the East Coast. This was 47% greater than the 1.029 Tcf level reported last year at the same time and 13% lower than the five-year average of 1.737 Tcf.

Colder-than-normal temperatures are forecast in much of the country by the National Weather Service for the start of spring, which should increase heating demand. However, temperatures won’t approach the levels of even just a week ago so demand won’t be quite as high.

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