The gap between dry gas prices and natural gas liquids (NGL) prices continued to widen this week as NGL prices improved across the board at both Conway and Mont Belvieu, with one exception, while gas prices fell at both hubs.

Natural gas feedstock prices fell 14% at Conway to $1.94 per million Btu (/MMBtu) and 5% to $2.11/MMBtu at Mont Belvieu. By comparison, NGL prices hit their highest levels since the start of the year.

The lone exception to these price increases was for Mont Belvieu C5+, which dipped very slightly to $2.48 per gallon (/gal). Even with the price decrease, its margin improved slightly. Conway C5+ improved 1% to $2.46/gal, its highest price since it was $2.49/gal the week of May 4, 2011. Its margin improved 2%.

Pentanes-plus (C5+) prices were slightly hindered by flat crude prices, as the rhetoric out of Iran has cooled in the past week and it was reported that crude inventories were building at Cushing. In addition, Saudi Arabia announced it would cover any crude shipment shortages while embargoes remain in place against Iran.

Meanwhile, the other heavy NGLs, butane and isobutane, continued to improve this week on the back of the return of alkylation units last week. Mont Belvieu isobutane prices rose 1% to $2.10/gal, its highest price since it was $2.13/gal the week of Jan. 11. This resulted in a 2% increase in margin at the hub. The Conway price experienced a larger increase as it rose 3% to $1.97/gal, its largest price since it was $2.18/gal the week of Dec. 28, 2011. The Conway margin improved 6% based off this price increase.

Butane prices rose 2% at both hubs with the Mont Belvieu increasing to $1.95/gal and the Conway price improving to $1.76/gal. The Texas margin improved 3% with the Kansas margin increasing 4%. The Mont Belvieu price was the highest at the hub since it was $2.02/gal the week of Jan. 11, while the Conway price was the highest at the hub since it was $1.85/gal the week of Jan. 4.

Ethane prices continued to improve at both hubs as the market continues to prepare for the scheduled maintenance of several fractionators this spring as well as the return to operation and additional capacity of some Gulf Coast crackers. The Mont Belvieu price rose 7% to 53¢/gal with a margin improvement of 11%. The Conway price rose 3% to 33¢/gal with an 18% gain in margin.

Although heating demand never really showed up this season, prices continue to improve. This is partially due to the market balancing itself, but also attributed to European traders buying U.S. propane swaps as a hedge against higher European prices, according to En*Vantage.

The Mont Belvieu price rose 5% to $1.29/gal, its highest price since the week of Jan. 25 when it was also $1.29/gal. This resulted in an 8% gain in margin at the hub. The Conway price rose 4% to $1.12/gal, the highest the price has been since it was $1.15/gal the week of Dec. 28, 2011.

Combined, these prices and margins resulted in the theoretical NGL barrel price to improve 3% to $56.15 per barrel (/bbl) at Mont Belvieu with a 4% increase in margin to $48.43/bbl. The Conway barrel price rose 2% to $49.95/bbl with a 6% gain in margin to $42.84/bbl.

The most profitable NGL to make at both hubs remained C5+ at $2.24/gal at both hubs. This was followed, in order, by isobutane at $1.78/gal at Conway and $1.89/gal at Mont Belvieu; butane at $1.56/gal at Conway and $1.73/gal at Mont Belvieu; propane at 94¢/gal at Conway and $1.09/gal at Mont Belvieu; and ethane at 20¢/gal at Conway and 39¢/gal at Mont Belvieu.

According to the Energy Information Administration, natural gas in storage for the week of March 9 decreased 64 billion cubic feet to 2.369 trillion cubic feet (Tcf) from 2.433 Tcf the previous week. This was 45% greater than the 1.634 Tcf figure reported last year at the same time and 52% greater than the five-year average of 1.562 Tcf.

As we’ve been reporting the past few weeks, it appears that cooling demand is coming earlier than expected with spring and even summer temperatures hitting parts of the country much earlier than usual. This trend will continue next week according to the National Weather Service. The forecast for next week calls for the East Coast, Midwest and Gulf Coast to experience warmer than normal temperatures for late March. Once again the West Coast is expected to experience cooler than normal weather.

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