Ethane prices tumbled this week, but Mont Belvieu prices improved as petrochemical producers are reportedly stocking up on supplies in anticipation of various crackers coming back online this spring.

The Mont Belvieu price dropped 5% to 48¢ per gallon (/gal), its lowest price since it was 46¢/gal the week of Feb. 15. The final day of this trading week, March 27, saw the price increase to 51¢/gal. However, Conway ethane continued to face headwinds as the price dropped 15% for the week to 26¢ per gallon (/gal), its lowest price since it was 23¢/gal the week of Feb. 15.

During the past week, there has been a great deal of discussion surrounding the propane storage overhang with several Wall Street analysts stating that this surplus could result in propane overtaking ethane as the most preferred feedstock. If this were true, we could see ethane prices negatively impacted.

However, it was noted by En*Vantage that propane exports are expected to increase in the second and third quarters, which would help reduce the propane surplus. “We do not share this view that the world is about to end for light NGLs. Yes, propane supplies are in surplus due to the lack of normal weather, and it is possible that we could see propane inventories reach 75,000 barrels by the end of the October as a worst-case scenario,” the company said in its Weekly Energy Report for March 29.

In addition, the company noted that while petrochemical demand for propane should increase, it will be difficult for it to overtake ethane as the most preferred feedstock as it would need to lose 14¢/gal. “Ethane’s floor value, set by natural gas, is extremely low, about 13¢/gal in the field, which equates to about 23¢ to 28¢ at Mont Belvieu … with a market value of over 50¢/gal, ethane has the flexibility to fall as much as 25¢/gal to maintain its preferred feedstock position if threatened by propane,” according to En*Vantage.

Despite the overhang, propane prices increased 1% to $1.27/gal at Mont Belvieu while they declined very slightly to $1.07/gal at Conway as export demand is increasing, which provides further credence to the notion that ethane will remain stable in its role as the most preferred feedstock.

Heavy NGL prices were largely flat this week as they followed the same path of crude prices, which have been hovering in the same price range for the past few weeks. Butane prices dropped 1% at both hubs with the Mont Belvieu price down to $1.93/gal and the Conway price down to $1.72/gal. Butane’s sister product, isobutane, was a mixed bag as the Mont Belvieu price increased 1% to $2.08/gal while the Conway price dropped 1% to $1.92/gal. Pentanes-plus (C5+) prices dropped at both hubs as the Mont Belvieu price was down 1% to $2.43/gal and the Conway price was down slightly to $2.39/gal.

Similarly frac spread margins were also a mixed bag despite heavy drops in natural gas prices that saw the Mont Belvieu price fall 4% to $2.03 per million Btu (/MMBtu) and the Conway price falling 9% to $1.88/MMBtu.

However, the sharp drop in ethane prices meant that the margin was unable to capitalize on the lower feedstock prices as the Mont Belvieu margin fell 21% and the Conway margin dropped 6%. Lower natural gas prices resulted in improved margins for propane and isobutane at both hubs, along with Conway butane and C5+.

The theoretical NGL barrel price dropped 2% at Conway to $47.42 per barrel (/bbl) with a 1% drop in margin to $40.54/bbl. The Mont Belvieu barrel was down 1% to $54.64/bbl with a very slight drop in margin to $47.21/bbl.

The most profitable NGL to make at both hubs was C5+ at $2.18/gal at Conway and $2.20/gal at Mont Belvieu. This was followed, in order, by isobutane at $1.73/gal at Conway and $1.88/gal at Mont Belvieu; butane at $1.53/gal at Conway and $1.72/gal at Mont Belvieu; propane at 90¢/gal at Conway and $1.09/gal at Mont Belvieu; and ethane at 14¢/gal at Conway and 34¢/gal at Mont Belvieu.

Natural gas in storage for the week increased 57 billion cubic feet to 2.437 trillion cubic feet (Tcf) from 2.380 Tcf, according to the Energy Information Administration. This was 50% greater than the storage level of 1.621 Tcf reported last year at the same time and 59% greater than the five-year average of 1.537 Tcf.

After several weeks in which the weather across the country was finally starting to help the industry by increasing cooling demand early after a winter with a decided lack of heating demand, the weather is again becoming fickle. According to the National Weather Service’s forecast for next week, temperatures on the East Coast are expected to be normal for late winter/early spring. These normal temperatures will extend into parts of the Midwest and Rockies. Increased temperatures are expected in the Gulf Coast and parts of the Midwest along with cooler than normal weather on the West Coast.

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