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Ethane Frac Spread at 5-Year Low as Natural Gas Surges

Jan. 7 (Bloomberg) -- The ethane fractionating spread fell to the lowest level in more than five years as cold weather boosted the price of natural gas.

The frac spread, which compares the price of ethane to the price of natural gas on the spot market, fell 1.1 cents a gallon yesterday to minus 2.1 cents, the lowest level since Jan. 5, 2009. The spread ranged from minus 1.9 cents to plus 4.7 cents in 2013.

Ethane at the Mont Belvieu, Texas, storage hub climbed 1.38 cents a gallon to 28.88 cents yesterday. Natural gas on the spot market at Henry Hub in Louisiana jumped 16.01 cents to $4.5005 per million British thermal units. Spot gas climbed to $4.5386 at 1:29 p.m. today, the highest level since July 2011. Frigid air gave Chicago a morning temperature lower than the South Pole and broke records across the country.

“A really big shot of cold air boosted natural gas prices up,” Peter Fasullo, a principal at EnVantage Inc., a Houston-based energy consultant, said by phone. “This is just strictly gas prices responding to cold weather more than ethane.”

Ethane, a chemical building block used as feedstock by companies such as Dow Chemical Co. and Westlake Chemical Corp., belongs to the group of natural gas liquids, or NGLs. Raw gas coming out of wells contains both NGLs and dry natural gas used for heating, cooking and power generation.

The low frac spread may cause producers to separate fewer NGLs from the dry gas stream, especially in fields that are particularly rich in ethane, Fasullo said.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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