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YEAR IN REVIEW: Ethane softens, stronger on average over 2016

HOUSTON, December 12, 2017 (PCW) -- Spot ethane prices fell 5.75 cpg during the course of the year-to-date, PetroChem Wire prices show, but are stronger on average than 2016 levels, reflecting ongoing volatility and rising demand from exports and the petchems sector.

Spot ethane traded between 16- 28.25 cpg during the year, starting the year at 25.25 cpg before coming in Friday at 19.5 cpp, a drop of 22.8 %. On average, however, spot prices were around 24.9 cpg for the year-to-date, compared to the 2016 average of 19.7 cpg, an increase of 26.3%.

The volatile trading range is reflective of the growing market participation in the lightest purity product. When it dropped to its yearly low of 16 cpg, it was reported that containment issues at Mont Belvieu and a storage position liquidation at that major pricing hub saw supplies ending up on the spot market, resulting in a plummeting price. But with the onset of new demand – two new crackers and record export levels – prices oftentimes shrugged off nat gas weakness and were able to remain relatively stable for the bulk of the year.

OxyChem/MexiChem’s new Ingleside cracker and Dow’s TX-9 unit at Freeport added some 123,000 b/d of new ethane demand; exports hit a record high of 6.515 million barrels in Aug (210,161 b/d).

Dec is ushering in a bit of a downswing for ethane. Nat gas is unusually weak for this time of year, trading below the $3/mmBtu mark due to continued robust production and rising storage inventories. A slew of unannounced cracker rate reductions is also adding to the bearishness (See News, this page). End-of-year inventory rebalancing has also seen some heavy volumes hitting the spot markets in recent weeks.

Going forward, the advent of four new crackers that should add an additional 278,000 b/d of ethane demand and rising exports should buoy the market. The forward curve reflects this contango on a quarterly basis through 1Q 2019 (See Forward Curves, page 4). Still, rising production and ongoing weakness in the nat gas markets should continue to keep a tight lid on ethane prices. -- Samantha Hartke


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