Ethane, the preferred feedstock for the ethylene industry, rose by almost 1 cent per gallon (gal) at Mont Belvieu, Texas, in the past week to approach its high for the year.

Rising natural gas prices resulted in a margin that tightened by 6.4% in the last week at Mont Belvieu, but ethane’s margin widened by almost 42% at Conway, Kan.

The U.S. ethylene industry is operating at 96% capacity, En*Vantage said in a recent report, and ethane cracking levels are up to about 1.26 million barrels per day (MMbbl/d) with more facilities soon to, well, get cracking:

  • The return of DuPont’s (NYSE: DD) Sabine River Works cracker in Orange, Texas, to operations;
  • The startup of Dow Chemical Co.’s (NYSE: DOW) Freeport, Texas, plant in the third quarter; and
  • Singapore-based Indorama Corp.’s startup of a cracker in Lake Charles, La.

Frac Spread: Ethane Crackers Ready To Serve By year-end En*Vantage forecasts U.S. ethane demand could reach 1.6 MMbbl/d, including 200 Mbbl/d of exports.

The Mont Belvieu price last week was 26.2% above what it was a year ago. At Conway, the increase was 30.2%.

The price of propane rose by 1.1% at Mont Belvieu and 1.5% at Conway. Mont Belvieu’s price is 17.5% above the price in 2016 at this time. At Conway, the price was 17.2% higher.

Rumors abound that as many as 10 export cargoes of propane could be canceled in the second half of May, En*Vantage said. That could drop exports to the range of 600 Mbbl/d to 650 Mbbl/d from the U.S. Energy Information Administration’s (EIA) estimate of 830 Mbbl/d for the week ended May 5.

Despite this, En*Vantage’s analysts still expect a tight propane market for the winter of 2017-2018. Cancellations will create conditions for improved export margins, which would lead to a rebound and a tighter market.

Frac Spread: Ethane Crackers Ready To Serve The butanes and C5+ rose at both hubs in the last week. With refineries running at high utilization for the summer driving season, demand for isobutane will rise and it will sell for a premium to butane on the Gulf Coast.

Storage of natural gas in the Lower 48 increased by 68 billion cubic feet (Bcf) in the week ended May 12, the EIA reported. The increase, above the Bloomberg consensus of 61 Bcf, resulted in a total of 2.369 Tcf. The figure is 13.7% below the 2.744 Tcf figure at the same time in 2016 and 12.1% above the five-year average of 2.113 Tcf.

Frac Spread: Ethane Crackers Ready To Serve Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.