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NGL stocks fall on strong propane exports; higher production cushions drop

Theglut of natural gas liquids moderated further in February, as a thirdconsecutive month of record propane exports reduced the inventory surplus tothe five-year average to the lowest in a year.

The averageNGL barrel was priced at $14.65/bbl on Feb. 29 and compared to $14.17/bbl onJan. 29, according to data from S&P Global Market Intelligence. Thecalculation is made using weights from Midstream Energy Group's June 2012presentation in which the average NGL barrel composition is 42% ethane, 28%propane, 8% normal butane, 9% iso-butane and 13% natural gasoline.

Natural gas liquids

Inventoriesof NGLs fell 17.15 MMbbl in February compared to the previous month and reached147.76 MMbbl, according to data from the U.S. Energy Information Administrationpublished on April 29. They were 14.55 MMbbl above the same month a yearearlier. The surplus to the five-year average fell to 38.09 MMbbl and was thesmallest surplus since February 2015.

"TheNGL glut continues to moderate amid tapering supply growth and robustexports," Jefferies analyst Chris Sighinolfi wrote in a note on May 2.

Thedecrease was driven mostly by propane, which fell 13.62 MMbbl sequentially.Butane declined 4.67 MMbbl and ethane dropped 510 Mbbl, while pentanesincreased 922 Mbbl.

NGLexports fell 1 Mbbl/d from the record high set in January and were 1.245MMbbl/d. Exports were 225 Mbbl/d above the same month a year ago mostly as aresult of the newly expanded export docks shipping propane and butane.

Productionof NGLs gained 98 Mbbl/d sequentially to reach 3.73 MMbbl/d in February, andheld below the record of 4.13 MMbbl/d set in August 2015. Production fromnatural gas plants was up 26 Mbbl/d to 3.33 MMbbl/d and compared to a record of3.44 MMbbl/d set in November 2015.

Overalldemand for NGLs lost 233 Mbbl/d and reached 2.72 MMbbl/d. Propane and butanemade up the bulk of the drop by losing 87 Mbbl/d and 52 Mbbl/d, respectively.


Inventoriesof propane and propylene dropped 13.62 MMbbl in February from January to reach64.80 MMbbl. Inventories were 10.01 MMbbl above the same month a year earlier,which was the smallest year-over-year increase since July 2014. The surplus tothe five-year average fell to 24.79 MMbbl from 30.94 MMbbl previously and wasthe lowest since March 2015.

Propanestocks fell sharply due to continued high levels of exports, which rose 18Mbbl/d to another new record of 884 Mbbl/d in February from the previous recordof 866 Mbbl/d set in January. Enterprise Products Partners LP started up its expandedexport terminal on the Houston Ship Channel late in 2015, according to astatement on Dec. 30,2015.

Capacityto export liquefied petroleum gas is now between 1.07 MMbbl/d and 1.11 MMbbl/d,according to calculationsmade by S&P Global Market Intelligence.

At884 Mbbl/d, exports of propane represent 76.9% of field-level production and51.5% of total production.

"Since2014, the EIA's reported monthly export figures have tracked ~14% higher thanits weekly data, implying a monthly export figure of ~735 Mbbl/d forMarch/April," Sighinolfi said.

Productionof propane increased 7 Mbbl/d to 1.715 MMbbl/d and remained slightly shy of therecord 1.718 MMbbl/d set in April 2015.


Inventoriesof butane and butylene fell 4.67 MMbbl in February from the prior month to20.67 MMbbl. The decline pushed inventories to just 110 Mbbl below the samemonth a year earlier.

Inventoriestypically fall through February, as refineries switch over to summer blendgasoline after spring maintenance. Inventories typically increase between Marchand September as refineries use less butane in summer gasoline blending.

Exportsof butane lost 34 Mbbl/d to reach 57 Mbbl/d in February. The record of 136Mbbl/d was set in June 2015.

Field-levelproduction was up 15 Mbbl/d to 326 Mbbl/d while demand fell 34 Mbbl/d to settleat 57 Mbbl/d.


Inventoriesof ethane declined 510 Mbbl in February to reach 32.73 MMbbl. Ethane stocksremain considerably below the record of 41.19 MMbbl set in July 2014.

Productionwas down 12 Mbbl/d to 1.15 MMbbl/d in February but was 85 Mbbl/d higher than ayear ago. Ethane output remained below the record of 1.23 MMbbl/d set inNovember 2015.

"Afterfalling to a near-term low of ~360 Mbbl/d in Dec '15 from an all-time high of~556 Mbbl/d in July '15, implied ethane rejection in Feb. of ~432 Mbbl/d was upmoderately from Jan's ~395 Mbbl/d and marked the second consecutive month inwhich implied rejection ticked higher," Sighinolfi said.

"Wecontinue to expect implied ethane rejection to remain robust through 1Q17before exports & steam cracker capacity additions begin to take effect."

Ethanedemand was down 10 Mbbl/d to 1.09 MMbbl/d and was down from the record of 1.17MMbbl/d set in November 2015.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.