What a deal! Take as much butane as you want — all for the low, low price of less than 10 cents/gallon (c/gal). That was the situation in Edmonton, AB, last November and the price stayed dirt cheap until a few days ago. Given a decline in demand for butane in crude blending, along with growing NGL production, the NGL processing and storage hub in Western Canada was awash in butane as winter approached. It remains flush with product today — and the price for Alberta butane is still low. How did this happen, and how will it play out over the next few months? Today, we examine the factors that led the Edmonton NGL market to see a price fall to near zero c/gal for the second time this decade.
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The first time we saw an Edmonton NGL commodity price sink to near zero (or less) was back in 2015 (purple line within dashed red oval in Figure 1). That time, it was propane prices that dipped to zero and below when Kinder Morgan’s Cochin Pipeline — which had been transporting propane from Fort Saskatchewan (just outside Edmonton) to the Chicago area — was reversed in order to bring diluent north to be blended into heavy crude and bitumen. (We blogged about that propane-price event in Nowhere to Run, Nowhere to Hide; also see Stuck in the Middle With You.) As we said in our intro, the second time that prices approached zero was this past fall, and the purity product in question was butane (green line within dashed yellow oval). In both cases, the driving factor was the same: a glut of supply in Alberta brought on by a combination of falling demand and a lack of sufficient outbound NGL pipelines to clear the market of product. Butane prices in the past week have popped up above 20 c/gal, but they remain well below the year-ago level.
Before we dive into the specific fundamental pressures facing Alberta’s butane market, however, we’ll provide a brief primer on the product. (Those familiar with butane markets should feel free to skip ahead one paragraph.)
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About the song
"Give It Away" was written by Jamey Johnson, Bill Anderson and Buddy Cannon and was the first cut and first single released from George Strait's 24th studio album, It Just Comes Natural. The song set a new record for #1 singles on the Billboard Hot Country Songs chart, being Strait's 41st one, beating Conway Twitty's previous record of 40. "Give It Away" also went to #35 on the Hot 100 and #47 on the Pop 100 charts.
Recorded in Nashville, and produced by George Strait and Tony Brown, It Just Comes Natural was released in October 2006. The album yielded four singles, three of which made the Top 10. It went to #1 on the Billboard Top Country Albums and #3 on the Billboard Top 200 Albums charts. It Just Comes Natural was nominated for Best Country Album at the 2008 Grammy Awards.
George Strait is an American country music singer, songwriter, actor, and record producer. Known as the "King of Country," he has sold more than 100 million records worldwide. He has made 29 studio albums, 12 compilation albums, seven Christmas albums, three live albums and one soundtrack album to date. Strait has had 60 #1 hit singles, more than any other artist in any genre. He is the 12th-best-selling artist in history. He has won one Grammy Award, one ASCAP Award, four Billboard Awards, 22 ACM Awards and 22 CMA Awards. Strait has appeared in five motion pictures. Currently retired from live touring, with the exception of four dates in Las Vegas later this year, he still records to this day, with his latest album, Honky Tonk Time Machine being released in March.
Comments
Don't forget the C4 that currently gets batched with C3 on Enbridge Line 1 bound for Sarnia (Plains/Pembina batch), with volumes from Ft.Sask, Empress, etc.
An excellent blog, and it seems to raise a number of questions that could be addressed here. How about a follow-up blog on NGL imports into Alberta and the increasing production of NGLs in Alberta and BC. Is it possible that a diluent pipeline, e.g. Cochin, will be converted to crude and reversed?