Propane supply/demand getting tighter
Posted: Wed Apr 19, 2017 9:27 am
From LPGas Magazine
Natural gas production is the engine that drives propane supply. U.S. marketed natural gas production in January 2017 was 2,343 billion cu. ft. (75.58 Bcf per day). Production was at 2,424 billion cu. ft. in January 2016 (78.19 Bcf per day). < Note that I have been saying for months in my weekly podcasts that U.S. natural gas production was down approximately 2.5 Bcfpd YOY.
The lighter natural gas production has slowed the growth of propane supply from natural gas processing. We estimate current growth in fuel-use propane supply from natural gas plants at around 45,000 barrels per day (bpd). That is up from last year, but well below the 184,000 bpd of growth between 2014 and 2015.
Drilling for natural gas is on the upswing, but it is light years away from the peak. The highest number of active natural gas drilling rigs was 1,606 in September 2008. That dropped to just 81 in August 2016. Last week, there were 160 natural gas rigs actively drilling in the United States.
Producers are drilling liquid-rich wells, and recovery from wells is improving. Still, the dramatic decrease in drilling has resulted in less natural gas production, and it is likely to take more activity than what is currently taking place to turn the tide. This should put upward pressure on natural gas prices in the short to medium term.
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There was a big increase in NGL prices from Q3 to Q4. I am eager to see what the companies got for their NGLs in Q1. Depending on the mix, NGL prices normally run about 50% of WTI. However, at the beginning of 2016 many of our model portfolio companies had to sell their NGLs at less than $10/bbl.
Natural gas production is the engine that drives propane supply. U.S. marketed natural gas production in January 2017 was 2,343 billion cu. ft. (75.58 Bcf per day). Production was at 2,424 billion cu. ft. in January 2016 (78.19 Bcf per day). < Note that I have been saying for months in my weekly podcasts that U.S. natural gas production was down approximately 2.5 Bcfpd YOY.
The lighter natural gas production has slowed the growth of propane supply from natural gas processing. We estimate current growth in fuel-use propane supply from natural gas plants at around 45,000 barrels per day (bpd). That is up from last year, but well below the 184,000 bpd of growth between 2014 and 2015.
Drilling for natural gas is on the upswing, but it is light years away from the peak. The highest number of active natural gas drilling rigs was 1,606 in September 2008. That dropped to just 81 in August 2016. Last week, there were 160 natural gas rigs actively drilling in the United States.
Producers are drilling liquid-rich wells, and recovery from wells is improving. Still, the dramatic decrease in drilling has resulted in less natural gas production, and it is likely to take more activity than what is currently taking place to turn the tide. This should put upward pressure on natural gas prices in the short to medium term.
----------------------------
There was a big increase in NGL prices from Q3 to Q4. I am eager to see what the companies got for their NGLs in Q1. Depending on the mix, NGL prices normally run about 50% of WTI. However, at the beginning of 2016 many of our model portfolio companies had to sell their NGLs at less than $10/bbl.