Frac Spread: Ethane Reaches 29-Month High

Strong natural gas prices pushed ethane to 29-month highs at the Mont Belvieu, Texas, and Conway, Kan., hubs in the past week, with a harsh winter storm targeting the Northeast expected to bolster prices even more.

Unlike last year at this time, when crude prices were in the $30s and a warm winter was anticipated, oil prices are higher and natural gas balances are tighter, En*Vantage said in its weekly report.

That means that ethane, hoisted aloft by the rise in natural gas, will spread its wings on its own as expansions are completed at LyondellBasell’s plant in Corpus Christi, Texas, and Dow’s plant in Plaquemine, La. En*Vantage sees a price separation of ethane from natural gas as early as second-quarter 2017, assuming no major delays.

As of this week, ethane prices at Mont Belvieu were up 36.5% in the last month. The increase at Conway was 46% in the same timeframe. Since last year at this time, ethane has climbed 74% at Mont Belvieu and 78% at Conway. Margins remain very thin at both hubs, although Mont Belvieu’s widened some in the past week.

Propane continued its rally, up almost 20% at Mont Belvieu and almost 25% at Conway since early November. By comparison, propane’s price is 61% above where it was one year ago at Mont Belvieu and 73% higher at Conway. In the same four-week period in 2015, propane fell 6.7% at Mont Belvieu and 14% at Conway.

The butanes continue to rock the NGL world, with normal butane setting a high for the year for the third straight week at both hubs. The four-week spree has left Mont Belvieu butane up 29.4% and Conway butane up 25.1%. That puts last week’s price 59% ahead of the price at the same time in 2015 at Mont Belvieu, and 60% ahead at Conway. During the same four-week period last year, butane registered slight drops at both hubs.

Though the weekly price dipped at Mont Belvieu, isobutane remained strong with its Mont Belvieu price up 26.2% and Conway up 25.5%. The year-over-year figures show a 74% gain at Mont Belvieu and 67% gain at Conway.

C₅₊ took a slight dip for the week at Mont Belvieu, though it was still the fourth-highest weekly price for 2016. At Conway, the increase to almost $1.17 per gallon was the highest at that hub since June 2015.

The hypothetical NGL barrel broke $26 at both hubs for the first time since December 2014. Margins widened by just a little at both hubs as NGL prices tried to keep up with quickly rising natural gas.

Storage of natural gas in the Lower 48 declined by 147 billion cubic feet (Bcf) in the week ended Dec. 9, the U.S. Energy Information Administration reported. The decrease, more than the Bloomberg consensus prediction of 130 Bcf, resulted in a total of 3.806 Tcf. It is more than the year-ago withdrawal of 46 Bcf. The total is a 1.3% decrease over the 3.856 Tcf figure at this time in 2015 and 5.1% above the five-year average of 3.62 Tcf.

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

Editor’s Note: The Frac Spread feature and Midstream Monitor will not appear next week but will resume on Dec. 30. Hart Energy wishes all readers a happy and safe holiday season.