Ethane Production Reaches Record High in March 2024

Propane prices at Mont Belvieu soared above $1/gallon on Wednesday — the first time that’s happened in the month of June since 2014. This buck-and-change price doesn’t come as much of a surprise for industry insiders, however. U.S. propane inventories have been very skinny lately, sitting at 56.2 MMbbl — or only 587 Mbbl above the five-year minimum based on yesterday’s EIA data. At the same time, propane exports have been riding high, averaging 1.3 MMb/d so far this year, up nearly 90 Mb/d from the same time frame in 2020, while production has remained virtually flat over the past 18 months. Surprise or not, the spike past $1/gal raises an important question: How high will U.S. propane prices have to go before exports are reined in so U.S. inventories can increase? Today, we discuss the key drivers behind the current price level and our propane market outlook for the second half of the year.

After years in the doldrums, ethane prices are increasing, not so much in absolute terms, but where it counts — relative to the price of natural gas. That means less ethane will be rejected — sold as natural gas — and more will be recovered as liquid ethane and sold as a petrochemical plant feedstock. As still more new ethane-only petrochemical plants come online over the next couple of years, ethane demand will increase, boosting ethane prices and resulting in still less ethane rejection. Does that mean ethane rejection will be a thing of the past? No, not even close. U.S. natural gas production, especially gas with a high ethane content, is growing so fast that ethane supply will continue to outstrip demand for the foreseeable future, with important consequences for ethane prices. Today, we continue our review of NGL market developments.

Prices for non-TET propane at Mont Belvieu yesterday fell to their lowest level in 13 years at 31.0 cnts/Gal (source: OPIS). A big part of the recent price decline is to do with surging propane storage inventory. Last Wednesday’s data from the Energy Information Administration (EIA) showed U.S. propane inventory levels increased by 3.8 MMBbl to 77MMBbl during the last week of May 2015. If storage injections increase at that rate for another couple of weeks then levels will surpass the record of 81.6 MMBbl set in October 2014. The trouble is – that record was set at the start of winter – traditionally the end of propane storage build season - but we are still only in June – with several months of storage build left. Today we discuss the growing propane surplus.