Frac spread margins largely performed well the first week of December as heavy NGLs experienced strong gains in margin due to the strong performance of crude prices. The strongest of the heavy NGLs has been isobutane as alkylation demand remains high.

However, the big question is whether this strong run for both crude oil and heavy NGLs can continue as crude began to drop below $100 per barrel as we went to press. In addition, isobutane alkylation demand might not remain as strong since gasoline crack spreads have turned negative.

The improved margins for heavy NGLs were tempered by decreased margins for ethane at both hubs. Conway ethane had by far the largest drop in margin, as it was down 24% from the previous week. This left the frac spread at a level where it is still profitable to make, but just barely and brings up the possibility of ethane rejection in the Midcontinent. Mont Belvieu ethane had a smaller drop in margin at 2% and still remains very profitable.

Despite the poor performance of ethane this week, the theoretical NGL barrel price improved at both hubs as the Conway price rose 3% to $49.38 per barrel (bbl.) with a 3% gain in margin at $36.60 per bbl. The Mont Belvieu bbl. showed a 2% gain in both price and margin with the bbl. price increasing to $61.10 and the margin improving to $48.75.

The most profitable NGL to make at both hubs remained isobutane at $1.86 per gallon at Conway and $2.04 per gallon at Mont Belvieu. This was followed, in order, by C5+ at $1.66 per gallon at Conway and $1.85 per gallon at Mont Belvieu; butane at $1.34 per gallon at Conway and $1.60 per gallon at Mont Belvieu; propane at $0.98 per gallon at Conway and $1.14 per gallon at Mont Belvieu; and ethane at $0.09 per gallon at Conway and $0.57 per gallon at Mont Belvieu.

Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel.