The “dead zone” between the July non-waiver wire trade deadline and the close of the season in September, when Major League Baseball teams battle for the playoffs, is called the “dog days of summer.”

In contrast, August is usually a pretty strong season for NGL prices, but the summer of 2014 is turning into a bust, much like a player traded to a contender in the hopes of securing a playoff spot but batting .202 for the stretch run.

Case in point: NGL prices remained at best static and, at worst, plunged through mid-August. There are several prime reasons for these struggles: infrastructure outages, construction delays and a cooler summer. All three of these headwinds are equal in terms of negatively impacting prices, and it is becoming more likely that prices will remain weak heading into the fall.

It is hard to fathom that as late as this spring there were fears over the industry’s ability to reload gas and propane supplies as inventory levels were at their lowest in years by winter’s end. However, mild summer temperatures have dramatically altered this story as storage levels are increasing at a rapid pace and should hit normal levels by the end of the injection season.

The good news is that ethane cracking capacity was still expected to increase by the end of August and full capacity should be achieved sometime in October. Current cracking capacity is about 970,000 barrels per day, but will increase to 1.2 million barrels per day once all plants are back online.

A large overhang is severely hampering ethane prices as they continue to plunge to their lowest levels this year. Frac spread margins remain negative at both the Conway, Kansas, and Mont Belvieu, Texas, hubs.

Propane’s savior

LPG exports have been the savior for propane prices this year, but limited domestic demand caused prices to plateau in July and fall in August. While they remain much stronger than at the same time last year, prices lost value in July compared to the previous month.

Heavy NGL prices outperformed their light counterparts as C5+ rose at both hubs and butane and isobutane remained flat at Mont Belvieu and increased at Conway.

These low prices are expected to be a short-term issue as international production levels are expected to decrease in the coming months and sanctions against Russia should limit the market for its production. The refinery run rates have been supporting heavy NGL, notably isobutane, and C5+ prices are correcting after falling throughout much of the month.

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