US NGL prices weak despite new demand sources

August 31, 2015 By    

Fitch Ratings, a financial information services group, reports pricing for U.S. natural gas liquids (NGLs) will likely remain weak and range-bound through 2015 and for the medium term, despite several new sources of incremental demand.

NGLs remain oversupplied in the United States due to the fast increment in liquids production from the shale revolution. As of early August, propane, butane and natural gas prices were down about 60 percent year over year, outpacing the decline in West Texas Intermediate.

Propane exports in particular increased sharply over the last few years, from 2011 to 2014, rising by 292,000 barrels per day (bpd), according to Energy Information Administration data. Annual propane production rose by 376,000 bpd over the same period.

Increased export capacity is under construction and is expected to reach completion soon, which will help balance some of the current surplus. These projects include Enterprise Products Partners LP’s expansion of its Houston NGL export terminal, slated for completion this year, and Phillips 66’s export facility in Freeport, Texas, slated for completion in 2016. Stronger seasonal demand as a result of crop drying and a cold winter heating season could help boost prices in the short term, but any improvement is expected to be limited.

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