Fundamental to our approach to energy markets at RBN is a view that natural gas, crude oil and NGLs have become much more interdependent than in the days before shale. What happens in gas impacts NGLs, which influences crude oil, which loops back to the natural gas market. There was a time when you could live out your career in the gas business, or the NGL business, or the crude business and get by with knowing very little about the other hydrocarbon markets. Those days are gone forever.
For example, today’s gas prices make no sense unless you understand the economics associated with NGLs and associated gas production. Production of condensates from crude wells directly compete with natural gasoline, the highest margin NGL for gas processors. Natural gasoline prices are being boosted by its use as a diluent for Canadian bitumen crude oil. Low prices for ethane result in rejection of ethane molecules back into the natural gas tailgate stream of gas processing plants. These examples and many more typify today’s highly integrated liquids and gas hydrocarbons markets.
At RBN, it is our thesis that by tracking and modeling the relationships between these hydrocarbons we can best anticipate the major upcoming developments in these interdependent markets. In other words, we can develop a collection of models, ratios and differentials that can act as ‘canaries in the coal mine’, or early signals that markets are changing direction.
Over the past year we have introduced a number of these models, ratios and differentials in our RBN Daily Post blogs, including the crude/gas ratio (Golden Age of Gas Processors), the Frac Spread (Another Fracing Problem), the Crack Spread (Gulf Coast Diesel Crack Habit), and many more. We follow these market factors each day, which is where we get many of the ideas for our Daily Post blogs.
Using our new SpotCheck market indicator pages, you can now follow these relationships as well. SpotCheck is simply a graphical representation of many of the models, ratios and differentials that we track in the regular course of our business at RBN. We are starting with 12 of these SpotCheck Indicators shown in the table below, and will be adding more over time. You can see the indicators for the past 10 business days on our home page, for the past year on our Spotcheck page, or you can manipulate the timeframe for each indicator on the Detail View.
First Six (Blue Boxes)
- Crude to Gas Ratio – CME/NYMEX Front Month crude oil futures divided by CME/NYMEX Front Month natural gas futures
- NGL to Crude Ratio – Weighted average of OPIS natural gas liquids prices (using factors in Frac spread) divided by CME/NYMEX Front Month crude oil futures
- Ethane to HH Gas - OPIS Non-TET Ethane price on a BTU basis divided by CME/NYMEX Front Month natural gas futures
- 12 Mo CME Natgas Strip - 12 Month CME/NYMEX Natural Gas Strip
- 2017 Crude to Gas Ratio - NYMEX 2017 strip crude oil futures divided by NYMEX 2017 strip natural gas futures
- Brent vs WTI Spread - Brent versus WTI crude oil price spread
Second Six (Red Boxes)
- Frac Spread – Frac spread using the formula described in the Daily Post Frac Spread.
- Propane to Crude Ratio - OPIS Non-TET Propane price divided by CME/NYMEX Front Month crude oil
- C2 & C3 MB to CW Spread – Difference between OPIS Mont Belvieu an Conway prices for Ethane and Propane
- C2 & C3 Petchem Margin - Petrochemical margin for OPIS Ethane and Propane based on model described in Daily Post Let’s Get Crackin
- C5 Petchem Margin - Same as above except for Natural Gasoline
- Crack Spread - 3:2:1 Crack Spread based on model described in Daily Post Gulf Coast Diesel Crack Habit