NGL prices reached a three-year high last week, propelled by sharp rises from propane and natural gasoline.

The hypothetical NGL barrel at Mont Belvieu, Texas, recorded a spread of $5.50 as the price of natural gas slipped by 3.2% at the Houston Ship Channel and the barrel climbed to just shy of $33. The barrel’s margin grew by almost 10%, led by a 24.1% expansion in the margin for ethane.

Propane rose 7.3% at Mont Belvieu and 6.4% at the Conway, Kan., hub with En*Vantage Inc. determining “there is a real potential of breaking $1 per gallon [gal] by early November.” Margins widened by 11.7% at Mont Belvieu and 7.9% at Conway.

With winter fuel demand still to come, En*Vantage did not expect a leap over the mid-90 cents/gal. The recent chill across much of the U.S. pulled prices up, with prices easing on Halloween along with temperatures. Exports, at or above the 900,000 barrel per day (bbl/d) also support the higher price and the analysts picked up on little discussion of cargo cancellations in November.

“Overall, the propane markets are in a period where a number of demand factors are beginning to converge and we are going to find out how much the ‘propane airplane’ has been overbooked,” En*Vantage said.

Among the factors:

  • Enterprise Products Partners LP’s (NYSE: EPD) propane dehydrogenation plant in Mont Belvieu will continue to ramp up, consuming about 30,000 to 35,000 bbl/d;
  • Lower temperatures will likely push some farmers to turn to propane drying from field drying for their crops; and
  • The colder weather will pit consumers needing propane as a space heating fuel against exporters.
En*Vantage is also bullish about the export outlook for butane, based on the spread between Brent and West Texas Intermediate crude oil and continuing refining issues in Mexico, Venezuela and Europe.

Butane rose at both hubs last week, remaining about $1/gal for the sixth straight week at Mont Belvieu and the seventh straight week at Conway. The Mont Belvieu price was 40% above what it was at this time last year; at Conway, the increase over that time period was 36.6%.

C5+ topped $1.30/gal for the first time since May 2015 at Mont Belvieu. The price was 27.6% higher that it was 12 months ago at that hub.

Storage of natural gas in the Lower 48 increased by 65 billion cubic feet (Bcf) in the week ended Oct. 27, the U.S. Energy Information Administration reported, above the Bloomberg consensus of 63 Bcf and the 2016 increase of 56 Bcf. It is also above the five-year average increase of 60 Bcf and resulted in a total of 3.775 trillion cubic feet (Tcf). The figure is 4.6% below the 3.955 Tcf figure at the same time in 2016 and 1.1% below the five-year average of 3.816 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.