New From PetroChem Wire . . . .
NGLs Week is PetroChem Wire's comprehensive summary of price trends, upstream and downstream costs, operations news and supply/demand forecasts. The report contains everything you'll need to understand what's happening in the NGL markets.
For more information, click here.
For all of our products and services,
Ethane supply-demand becoming balanced as spot prices surge
HOUSTON, June 13, 2018 (PCW) -- Spot ethane values have been consistently assessed above the 30 cpg mark since Tuesday, nearing levels last seen in early 2014, PetroChem Wire historical price data shows. These elevated prices come at a time of surging natural gas values, record ethane production and rising demand from petchems cracking and exports.
On average, NYMEX natural gas front-month futures prices are at their highest levels since early January. Ethane has moved up as well, ensuring the frac spread (the differential between ethane and natural gas values) is above the $1/mmBtu mark. Such levels are considered attractive for increased ethane recovery. Meanwhile, ethane production hit an all-time high in March of 1.66 million b/d.
Exports came in 233,000 b/d, the third highest level on record, according to the EIA data. Petchems cracking demand for ethane rose about 85,500 b/d in 2017 over 2016 levels, or about 90%, and 2018 should end with an uptick of nearly 103,000 b/d (57%), according to PCW estimates.
Since the advent of the shale era, ethane demand has lagged supply, resulting in ethane values typically following the ebbs and flows of natural gas. With demand now on a serious upswing, has the tipping point finally arrived when demand has a greater sway over price movements?
As seen in the chart below, ethane production has lorded over demand with the exception of winter production freeze-offs (Dec 2015-Jan 2016) and hurricanes (i.e. Harvey in late Aug 2017).
It is at the beginning of 2Q that supply and demand begin to look more balanced, with the supply overhang – even in the face of record production – at its slimmest outside of weather-related anomalies. It was March when Chevron Phillips started up its 3.3 billion lbs/yr ethane cracker in Cedar Bayou, TX, with a speedy ramp-up to nearly full rates in April. The cracker is only the second in a slew of world-scale ethylene units coming online over the next two years that have been largely expected to tip the scales in ethane demand’s favor.
Going forward, demand is only set to increase. Exports are forecast to rise to around 300,000-350,000 b/d by year’s end, according to several analysts; petchems cracking demand is set to top out at 1.5 million b/d during that time frame. On the supply side, production is expected to increase by as much as 200,000-250,000 b/d, according to several analysts, further tightening the supply-demand balance. -- Samantha Hartke