Natural Gas Storage Overhang Nearly Gone

Heavy decreases in natural gas feedstock prices improved the natural gas liquids (NGLs) frac spread margins at both Conway and Mont Belvieu this week, with the exception of Conway ethane. Natural gas feedstock prices fell 12% at Conway and 13% at Mont Belvieu, which lowered the price to under US$5 per million Btu at each location.

Due to the steady decrease in value for Conway ethane, the frac spread margin continues to stumble despite improvements show by all other NGLs at both hubs. The smallest gain in margin at Mont Belvieu was for iso-butane, which was up 4%.

While Conway saw the only drop in margin at either hub this week, it also saw the two largest gains in margin – 8% for both butane and C5+. The largest gain in margin at Mont Belvieu this week was for C5+ at 7%.

The most profitable NGL to make at both locations was C5+ at $1.27 per gallon (/gal) at Conway and $1.26/gal at Mont Belvieu. This was followed, in order, by: iso-butane at $1.09/gal at Conway and $1.14/gal at Mont Belvieu; butane at 88¢/gal at Conway and 97¢/gal at Mont Belvieu; propane at 81¢/gal at Conway and 79¢/gal at Mont Belvieu; and ethane at 27¢/gal at Conway and 40¢/gal at Mont Belvieu.

Natural gas in storage for the week of February 12, the most recent data available from the U.S. Energy Information Administration, was down 190 billion cubic feet to 2.025 trillion cubic feet (Tcf) from 2.215 Tcf the prior week. The storage overhang gained momentum in being worked off as this was just 1% above the storage level of 1.999 Tcf recorded last year at the same time and 3% greater than the five-year average of 1.972 Tcf.

The U.S. National Weather Service’s forecast for the first week of March includes a weaker cold front to extend through much of the Southern United States, but the key areas in the Tri-State and Mid-Atlantic regions are expected to experience normal to warmer weather. – Frank Nieto