Ethane’s status as the most preferred ethylene feedstock has been challenged by propane and butane in different parts of the country. This should change as crude prices improve and in turn help raise heavier NGL prices, but in the meantime butane remains the most preferred feedstock in much of the country.

This represents another in a series of challenges over the past few years for ethane, which first had to contend with the economic downturn in 2008, followed by a tremendous storage overhang saturating the market, and then a shortage of cracking capacity due to turnarounds and expansions.

While there is still a great deal of supply to work off, cracking capacity has returned and grown. Prices have at least stabilized in recent months despite the downturn in crude prices with frac spread margins reaching a flat state. It is likely that ethane will continue to slowly improve due to not being dependent on crude prices, according to Warren Wilczewski, industry economist for the U.S. Energy Information Administration’s (EIA) Office of Petroleum, Natural Gas and Biofuels Analysis.

“Just as olefin and aromatics prices are dictated by developments on the international market, which in turn are to a great degree influenced by the price of crude, so feedstock prices—other than ethane—dictated by events not limited to North America,” he told Midstream Business.

“Ethane is the only feedstock in North America with prices not dictated by the price of crude. Furthermore, we are seeing propane prices bouncing up quicker than ethane at Mont Belvieu, and while it is hard to know individual plant economics; as that ethane to propane price spread widens, ethane should again come into favor,” Wilczewski added.

The additional markets available to propane via LPG exports is an incentive that the ethane market won’t experience until at least 2018 when more export capacity is brought online along with additional cracking capacity.

As it stands now, the bounces experienced in both the crude and natural gas markets helped support NGL prices at both hubs. Although ethane had the largest growth in value, it remains the least profitable NGL by far.

The price rose 11% at Conway and 6% at Mont Belvieu to 19 cents per gallon (gal), which was its largest value since the week of Jan. 14 at both hubs. However, the margin was still negative in both markets. By comparison, propane prices rose only 4% at Conway to 57 cents/gal and 2% to 60 cents/gal at Mont Belvieu, but had positive margins at each hub.

Heavy NGL prices largely experienced gains, but seem to have plateaued as demand has also flattened. It is unlikely that they will experience strong gains until crude prices make further gains in the months ahead.

The most profitable NGL to make at both hubs was C5+ at 82 cents/gal at Conway and 86 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 58 cents/gal at Conway and 41 cents/gal at Mont Belvieu; butane at 37 cents/gal at Conway and 38 cents/gal at Mont Belvieu; propane at 30 cents/gal at Conway and 33 cents/gal at Mont Belvieu; and ethane at negative 1 cent/gal at both hubs.

Natural gas storage levels were down 219 billion cubic feet the week of Feb. 20, according to the EIA. This left storage at 1.938 trillion cubic feet (Tcf) compared to 2.157 Tcf the previous week, which was 42% greater than the storage level of 1.362 Tcf last year at the same time and 2% lower than the five-year average of 1.968 Tcf.

There is room for further storage withdrawal the first week of March as the National Weather Service anticipates colder-than-normal temperatures throughout the country due to a frigid winter stubbornly refusing to end.

However, this hasn’t had a huge impact on gas prices, which remain below $3 per million Btu at both hubs. While this doesn’t bode well for summer gas prices, it does ensure that storage levels are at a level to support large injections.

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

NGL prices

frac spread

resin prices