As new Gulf Coast ethane crackers and the Mariner East expansion expand the market for U.S. ethane, Mt Belvieu prices of this feedstock have achieved a breakthrough. For the first time in years, ethane is trading at more than 10 cpg above its fuel value, pushing Mont Belvieu prices to 34 cpg as of late June. While ethane prices are quite volatile, the recent increase represents a breakthrough when one considers ethane's premium to its fuel value. The pricing chart on the map below shows the change in both the premium and outright ethane prices. Until recently, one constant has been that ethane's premium to fuel value rarely wandered far from 5 cpg.
Ethane recovery trends in the Rocky Mountain (PADD IV), also shown on the map below, provide insight into how sustainable the recent price increase will be. Production in PADD IV increased from less than 100,000 b/d in early 2017 to as much as 140,000 b/d in the first half of 2018. This is not much in the context of the overall U.S. market, but it is a big movement for PADD IV, especially when one considers that production of other NGLs have barely changed, which means ethane previously being rejected is now being recovered. Depending on specific location, the cost of transporting ethane from PADD IV to Mt Belvieu is anywhere from less than 10 cpg to 15 cpg. The fact that Mt Belvieu is drawing Rocky Mountain ethane previously rejected into the gas stream is evidence that there is fundamental support for the recent increase in Mont Belvieu prices.
In ESAI Energy's newest market update, we analyze and forecast fundamentals and price relationships between ethane, LPG and naphtha and the implications for petchem demand and balances in Asia, Europe, North America and the rest of the global market. Learn more about ESAI Energy's Global NGL analysis below.