Ethane and propane spot prices during the second half of last year were near or below the bottom of their 2006-2010 range due to an overabundance of supply, the U.S. Energy Information Administration (EIA) said Tuesday.
As the midstream sector braces for the potential of expanded ethane rejection this year before prices recover, EIA said propane’s average 2012 spot price was almost 32% below its 2011 average price, and ethane’s price was nearly 48% below the 2011 average.
Earlier this month, analysts at U.S. Capital Advisors projected that 2013 would see more ethane rejection. “Mont Belvieu [TX] ethane prices now at about 23 cents/gallon are at a threshold that favors more widespread ethane rejection, something that could happen in a meaningful way during 2013 if supplies continue to increase and high inventory levels keep a lid on propane,” they wrote (see Daily GPI, Jan. 7).
Average spot prices for normal butane, isobutane, and natural gasoline fell during summer 2012 as oil prices fell. They returned to near the top of the five-year range toward the end of the year but were still below 2011 averages. Annual average spot prices for normal butane, isobutane, and natural gasoline were down relative to 2011 by 5%, 12% and 7%, respectively, EIA said in a brief.
“Both production and stocks of ethane and propane were high, depressing prices and causing an increasing amount of ethane to be rejected,” EIA said. “Despite growing NGL [natural gas liquids] production, other NGL products (normal butane, isobutane, and natural gasoline) have maintained higher price levels compared to ethane or propane. These NGL are primarily used as gasoline blendstock and to some degree compete with crude oil and crude derivatives. Accordingly, they are priced in relation to crude oil and tend to track it quite closely.”
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