NGLs Price and Fundamentals

Ethane

In the last 10 years, ethane prices have been mostly determined by natural prices. Ethane has the flexibility to either be extracted and sold separately (at Mont Belvieu, Texas or Conway, Kansas) or left within the natural gas stream (commonly called rejection). This flexibility creates a direct link between the two commodities. 

Commentary

July 7: Ethane prices have moved lower since April, mostly due to the decline in natural gas prices. However, in the first half of 2025, ethane at Mont Belvieu experienced disruptions to its own supply and demand balance in the form of exports. Frac spreads between ethane and natural gas have eroded as the domestic US ethane market is expected to be well supplied. A lower frac spread indicates more ethane is likely to be rejected and be accounted for in the natural gas stream. 

July 24: A new Ethane export terminal built by Enterprise Products Partners (EPD) is loading its initial cargo, according to shiptracking data. Both MarineTraffic and VesselFinder reported on Thursday, July 24, that the medium-sized tanker, Navigator Eclipse docked at the EPD's Neches River facility. In a Linkedin post, Samantha Maria-Hartke at Vortexa, wrote that the Navigator Eclpise loading is "an apparent commissioning cargo" from the new export terminal. "The ship Navigator Eclipse has nearly exclusively moved ethane between the United States and China since mid-2021," Hartke added.

The first phase of the Neches River startup has an ethane capacity of 120 MBbl/d, according to Enterprise' previous public statements. To put this amount in perspective, the EIA estimated the US exported a record 492 MBbl/d of ethane in 2024. EPD has also said that they would convert part of its 240 MBbl/d facility at Morgan's Point to ethylene after Neches River becomes operational. The second phase of Neuches River expansion is planned for completion in 1H 2026. This part of the expansion has a "flex" setup capable of exporting 180 MBbl/d of ethane, 360 MBbl/d of propane or a sliding-scale combo between the two.

July: The US Department of Commerce now requires as of May 23, 2025 an export license for ethane shipments to China. Loadings to China have slowed or been redirected. See the table below for a timeline of events involving ethane:

Sources: Reuters, EIA, oilandgas360.com, WSJ

Ethane Background

Ethane Rejection Economics:

• Ethane can be "rejected," meaning producers (or the operator of a processing plant) leave ethane in the natural gas stream instead of recovering it, usually when ethane's market value is low relative to that of natural gas.

• When natural gas prices rise relative to ethane, producers prefer ethane rejection, reducing ethane supply and supporting ethane prices. Conversely, lower natural gas prices encourage ethane extraction, increasing supply and pressuring ethane prices downward. This relationship means that if the price ratio between ethane and local natural gas becomes too small or too large, ethane rejection can correct the imbalance.

Extraction Flexibility:

• Ethane recovery is economically viable when the price spread (the "frac spread") between ethane and natural gas is favorable.

• Producers regularly monitor this frac spread. If natural gas prices climb significantly, the relative incentive to extract ethane diminishes, reducing ethane supply and aligning ethane price movements with natural gas trends.

Infrastructure and Market Linkages:

• Many natural gas processing facilities have the option to easily switch between ethane recovery and rejection based on economics.

• This operational flexibility means ethane supply frequently responds to shifts in natural gas pricing, tightening the correlation between their prices.

Market Demand and Export Dynamics:

• U.S. ethane demand heavily depends on petrochemical cracking and export markets. However, these demand factors often adjust slowly compared to changes in natural gas economics, leaving natural gas price dynamics as the primary short-term driver of ethane price direction.

Propane

Propane prices in the U.S. are influenced by crude oil prices, other NGLS prices, weather, and propane's own supply, demand, and inventory balance. Unlike ethane, propane cannot be rejected into natural gas stream in large amounts. Propane's relative value to oil typically strengthens when domestic inventories are low (that is, demand has been relatively high compared to supply) and weakens when the U.S. propane market is well-supplied. Because of this interaction between propane's economics and other market prices, propane's price history is complex. 

Commentary

August 8: Propane dropped in July relative to WTI as propane inventories continued to rise above the five-year average. Propane as a percentage of WTI fell to about 44% as on early August, down from just under 50% in June. The inventory gains in propane come amid robust proudction and weaker propane exports. 

July 10: The propane market has turned more bearish as of July amid outsized increases in inventories. Strong propane production and weaker exports were major contributors to the rapid rise in stocks. Higher freight costs and weaker international arbitrage economics weighed on exports. On the supply side, production reached nearly 2.9 MMBbl/d in May, up 0.1 MMBbl/d from April. Weekly data does show propane production back down near 2.8 MMBbl/d in early July. The Mont Belvieu propane-to-crude ratio has weakened down to near 45% compared to nearly 60% in April. The decreasing ratio to crude implies that propane's supply-demand dynamics have become looser and inventories are evidence of this.

Sources: AP News, Reuters, Bloomberg

Propane Background

Reasons why propane prices follow crude oil prices:

Petrochemical Demand:

• Propane serves as a feedstock in petrochemical plants, particularly in propane dehydrogenation plants (PDH) and in steam crackers, which can switch feedstocks based on price competitiveness between propane and other feedstocks (usually ethane and butane in the U.S.).
• Rising crude prices often lift naphtha prices, making propane a more attractive feedstock for petrochemical plants (globally) and thus supporting propane prices.

Heating Dynamics:

• Propane demand is seasonal, because it is a heating fuel in winter. Because of the concentration of demand in winter months, propane prices also follow the seasonal pattern of higher prices in winter and lower prices in summer.
• Propane is consumed from on-site tanks at end-user facilities (home, business, industrial location), rather than delivered directly from a pipeline. Therefore, demand statistics from the US EIA often appear after the fact, when the retail distribution network refills from primary storage at the fractionator sites.

Export and Global Pricing Influences:

• The U.S. exports significant volumes of propane, linking domestic prices to international LPG (Liquefied Petroleum Gas) markets, which are heavily influenced by global crude benchmarks.
• When crude prices increase internationally, overseas propane benchmarks like the Saudi Aramco contract price typically rise, encouraging maximium exports from the US. 

Infrastructure and Storage Dynamics:

• U.S. propane storage and export infrastructure allows propane markets to rapidly respond to global crude-driven market signals.
• Robust export capacity connects domestic propane pricing closely to crude-driven global LPG demand.

Influence of Propane’s Own Supply-Demand Balance

• • While propane pricing largely tracks crude oil, propane’s own domestic supply-demand fundamentals independently affect its relative pricing and market value.

  • When U.S. propane inventories are low—typically due to strong domestic or export demand—propane’s price premium relative to crude tends to increase.

  • Conversely, if propane supply exceeds domestic and export demand, resulting in higher inventories, propane’s value relative to crude often weakens, even if crude prices remain stable or strong.

Butane

Butane, specifically normal butane (n-butane), is a natural gas liquid (NGL) produced primarily during natural gas processing and petroleum refining. It's distinct from propane and ethane due to its heavier molecular structure and distinct market uses. Like propane, butane closely tracks crude oil due to its end-uses in transportation and petrochemicals.

Commentary

July 10: Like propane, butane has weakened in July. Butane stocks have risen and is reflected in the higher natural gas plant liquids (NGPL) inventory reported by the EIA. Again, like propane, butane exports were lower recently with falling butane arbitrage economics for delivery to Asia and Europe. Freight rates are also weighing on the export arbitrage and would need to fall in order to increase exports. 

Butane Background

U.S. Butane Market Overview

Key Uses:

• Gasoline blending (primary, seasonal)

• Petrochemicals (producing isobutane, butadiene, alkylate)

• Heating fuel (minor, compared to propane)

• Exports (primarily Asia, Latin America, Europe)

Supply Sources

• Natural Gas Processing: Primary source, separating butane along with other NGLs (propane, ethane, pentanes).

• Refineries: Secondary source from crude oil processing.

Infrastructure & Storage

• Primarily stored in Gulf Coast salt dome caverns (Mont Belvieu, TX).

• Transported domestically via pipelines, rail, and trucks.

Domestic Demand

• Peak in winter (Oct-Mar): Increased use in gasoline blending due to higher vapor pressure requirements.

• Reduced in summer (Apr-Sep): Regulatory limits lower blending demand.

• Consistent year-round petrochemical demand.

Seasonal Pricing Patterns

• Winter: High blending demand elevates prices relative to crude oil, peaking around Jan-Feb.

• Summer: Reduced blending leads to excess supply, softening prices; excess typically exported or stored.

Exports

• Growing due to rising U.S. production.

• Key markets: Asia (Japan, South Korea), Latin America, Europe.

Pricing Dynamics

• Quoted at major NGL hubs (primary benchmark: Mont Belvieu).

• Influenced by:

  • Crude Oil Prices: Close correlation due to shared end-markets.

  • Gasoline Market Dynamics: Competition with natural gasoline, ethanol, and refining margins.

  • Natural Gas/NGL Production: Higher production can depress prices if demand lags.

  • Export Conditions: Increased exports support domestic pricing.

  • Inventory Levels: High inventories pressure prices; low inventories support pricing.

General Market Principles

• Butane pricing closely tracks crude oil due to similar applications.

• Seasonal inventory cycles: builds in summer/fall, draws in winter, monitored closely by the market.

• Mont Belvieu prices serve as key benchmarks for domestic and international contracts.

Isobutane

History + Forward

Natural Gasoline

History + Forward

Commentary

July 10: Recently, the price of natural gasoline to WTI (the ratio) has declined to 80% in July from 90% in April. In the US, natural gasoline is primarly used as blend stock for motor gasoline. Prices should align with natural gasoline's value as a blending stock. There is also an important relationship with global naptha prices and will influence the US Gulf Coast price of natural gasoline.

Natural Gasoline Background

Natural gasoline is an NGL on the heavier end of the hydrocarbon spectrum, typically designated as pentanes plus (C5+). It resembles a very light crude or condensate. In the industry, it’s often simply called “natural gasoline” or “plant condensate.”

Key Uses

• Gasoline blending (raising octane and vapor pressure)

• Diluent for heavy crude oil (especially in Canada’s oil sands, to create “dilbit”)

• Feedstock for petrochemical processes

• Occasionally sold as a standalone fuel component or exported

Production Sources

Natural gasoline is produced mainly from:

• Natural gas processing plants (the heaviest portion of the NGL barrel)

• Stabilization of field condensate during crude oil production (less common in marketed NGL reporting)

The U.S. shale boom has notably increased production, especially from the Permian Basin and Eagle Ford Basin.

Infrastructure & Storage

Natural gasoline is stored in:

• Salt dome caverns and tanks in Gulf Coast hubs (Mont Belvieu is the primary location)

• Field-level tankage in producing regions

• Railcar or pipeline storage during transit to blending or export locations

Pipelines move volumes from production regions to refineries, blenders, or export docks. Rail transport is also common, particularly to Western Canada.

Domestic Demand

The main domestic uses are:

• Blending into finished gasoline to meet vapor pressure and octane specs

• Diluent blending with heavy crude oil from Canada and North Dakota

• Smaller volume into petrochemical production

Diluent demand is especially important: Canadian oil sands operations rely heavily on U.S. natural gasoline to move bitumen by pipeline.

Exports

Exports are focused mainly on:

• Canada (as diluent)

• Some volumes into Latin America and occasional Asian buyers for blending

Canadian diluent demand is the single biggest structural driver of export flows.

Pricing

Natural gasoline prices are typically quoted at:

• Mont Belvieu (primary benchmark)

• Conway, Kansas (Midcontinent benchmark)

Key Pricing Drivers

• Crude Oil Prices
  Natural gasoline tracks very closely with WTI because of its similarity to light naphtha or condensate.

• Gasoline Blendstock Demand
  Seasonal blending patterns influence pricing.

• Canadian Diluent Demand
  Steady, structural demand from Western Canada supports a large baseline consumption.

• Natural Gas/NGL Production
  Higher shale output increases supply, affecting balances and pricing.

• Inventory Levels
  Market participants watch stocks to gauge oversupply or tightness.

• Export Economics
  Pipeline and rail transportation costs into Canada set price floors.

Seasonality

Natural gasoline shows less pronounced seasonality than propane or normal butane but still has patterns:

• Summer Driving Season (April–September): Higher demand for gasoline blending raises prices relative to crude.

• Winter: Decreased recoveries at processing plants, because natural gasoline more readily condenses as part of the crude oil stream. 

• Spring and Fall Refinery Maintenance: May cause temporary softening in blending demand.

Overall, seasonal swings are tempered by consistent diluent demand, which anchors baseline consumption levels.

General Market Principles

Strong Crude Oil Correlation
Prices often move in tandem with WTI and condensate markets.

Blending and Diluent Dynamics
Demand comes from gasoline spec requirements and Canadian bitumen transport needs.

Infrastructure Constraints
Pipeline and rail capacity to Canada can cause basis volatility.

Export/Import Economics
Netbacks from Canadian oil sands influence pricing spreads.

Inventory Cycles
Builds occur in lower demand periods, with draws during blending peaks or pipeline restocking.

LPG

Exports of LPG from the US are critical to allowing for the growing amounts of NGLs from shale. The future of propane and butane prices hinge on the ability for those purity products to reach the water and fulfill overseas demand. If terminal or dock cacapity are tight, inventories in the Lower 48 could swell, depending on production growth levels. As mentioned above, higher levels of US inventories typically result in lower prices. Below are planned and existing export terminal addtions that will help clear excess propane and butane from the US.

Commentary

July 10: LPG terminal utilization was near 80% in July. Utilization should ease as new expansions come online in July 2025 and later in 2026. 

Background on U.S. LPG Exports

The United States has become the world’s leading LPG exporter over the past decade, largely because of the shale boom that dramatically increased natural gas liquids (NGL) production. When natural gas and crude oil are produced, significant volumes of NGLs—especially propane and butane—are extracted along with them.

Domestic demand for propane (e.g., heating, agriculture, petrochemicals) and butane (e.g., blending, refining, petrochemicals) has limits and is seasonal. As shale output surged, U.S. producers faced the risk of oversupply and low domestic prices. LPG exports emerged as the critical pressure valve to balance the market.

The Gulf Coast, with major fractionation hubs (like Mont Belvieu) and deepwater export terminals, became the launch point for large-scale shipments to Asia, Latin America, and Europe. These exports have grown to over 2.5 MMBbl/d (waterborne and land exports) in recent years, making them essential for:

• Clearing surplus production of propane and butane that the U.S. market cannot absorb year-round.

• Supporting domestic NGL values relative to crude oil by tapping higher-value overseas demand, particularly from Asian petrochemical and heating markets.

• Creating price linkages between U.S. hubs and international benchmarks (like FEI in Asia).

In effect, LPG exports are no longer optional—they are fundamental to balancing U.S. propane and butane supply. Without strong export flows, inventories could quickly swell, pressuring prices and reducing NGL recovery incentives across the upstream and midstream sectors.

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