NGL prices were largely stagnant, with a slight trend down at the beginning of July as they followed losses for natural gas prices and crude. Overall, NGL prices remained flat compared to the levels posted in the second quarter. Gas prices lost value due to weaker cooling demand from lower-than-normal summer temperatures around the country. Production may experience some stranding issues as several pipelines and processing plants will be down for maintenance in the third quarter, which could result in a short-term price improvement should cooling demand increase.

Ethane and propane experienced price decreases based on the decrease in gas values. Ethane prices in particular are strongly correlated to gas prices due to large storage builds caused by a significant volume of processing capacity being taken offline by plant maintenance. Although there have been the expected delays, it is anticipated that ethane cracking capacity will approach 1.2 million barrels per day by August. It is likely that prices will take a bit longer to improve from their current levels, but they should see increases by the fourth quarter.

While ethane margins remain negative and prices continue to struggle, it is encouraging that they have performed as well as they have—considering the headwinds faced for much of the past two years.

Increased inventory is bad news for ethane, but the reloading of propane inventory levels is a major positive for the market on a long-term basis, following this year’s cold winter that eliminated the storage overhang. According to a PIRA Energy Group report, U.S. stocks of LPG are rebuilding at record rates as Europe and Asia are well-supplied.

The reload is occurring faster along the Gulf Coast than in the Midcontinent, which should result in Conway, Kan., hub prices retaining the price premium this fall and winter they’ve enjoyed over Mont Belvieu, Texas, hub prices for much of 2014.

The lone exception was Conway isobutane, which increased 2% to $1.46 per gallon, its highest price in a month. This market has been an outlier for much of the second half. It was assumed that facility outages were the cause of this price spike, but it appears that the normal tightness of the market is causing the surge. This is especially true given the low volatility of the product at the hub.

Butane prices have tumbled at both hubs, due to a combination of decreased crude prices and weaker LPG export demand. Pentanes-plus (C5+) also experienced decreases in value at both hubs to their lowest levels in a little more than a month.

Frank Nieto can be reached at fnieto@hartenergy.com or 703-891-4807.