Ethane prices surge on strong demand, lack of pipeline volume

27 October 2011 18:22  [Source: ICIS news]

HOUSTON (ICIS)--Ethane prices surged to a three-year high this month on falling inventories and inadequate pipeline capacity to meet strong demand by the chemical market, a midstream analyst saod on Thursday.

 “[A] key factor is the continued gradual decline in inventory in Gulf coast storage,” said analyst Dan Lippe with Petral Worldwide. “Ethane buyers have finally snapped to the fact that ethane inventory will fall to record lows within the next three to four months.”

Mont Belvieu ethane prices in Texas surged above 90 cents/gal on 13 October, and have been holding between 90 cents/gal and $1/gal since then. The last time ethane sustained prices above 90 cents/gal was in early September 2008. 

Anne Keller, president of Midstream Energy Group, said when demand goes much above 932m bbl/day, inventory drops more quickly.

“That can only go on until the inventory is used up or a plant goes down or switches feedstock to reduce ethane consumption,” Keller said. “There is more demand than supply on a day to day basis.”

Keller said supply will not increase until the natural gas liquids (NGL) pipeline grid expands to bring more barrels from the field to gas processing facilities and crackers. Some ethane is being transported by truck and rail.

Enterprise Products, Dow Chemical and Energy Transfer partners have each announced projects to add or expand capacity from western Oklahoma to west Texas. In addition, OneOk announced new line to add capacity from Oklahoma to Mont Belvieu.

The pipelines will each take 18 to 24 months to build.

“The turnarounds in September had almost no bearish impact on ethane prices – probably some NGL traders were surprised and there is some likelihood that short covering had a bullish impact on ethane prices,” Lippe said.

By: Sheena Martin
+1 713 525 2653

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