Q3 Rise in Oil and Gas Prices Holds Ratio Steady

Price of key feedstock up as expansion projects prepare to come online

The oil to gas price ratio has remained steady as
both oil and gas prices have trended upwards in
the third quarter. From July to October 2016 the
ratio of WTI to Henry Hub held steady between
14 and 16, as moderate rises in the oil price were
balanced by greater rises in gas prices.
Oil prices have stabilised around $50/bbl after
OPEC agreed to a production limit in the last
week of September. The limit will come into
effect in November and cap production to a
range of 32.5-33.0 million barrels per day
(bbl/d).
Gas prices in the US are expected to remain
below $4/mmbtu for 2016 and into 2017 due to
the volume of shale gas production and
improvements in gathering infrastructure,
keeping ethane projects profitable.
Baker Hughes reported that the US weekly natural
gas rig count increased by 11 units in the second
week of October, the largest weekly increase since
2014. Of the 11 additional natural gas rigs, more
than half are in Louisiana, with 2 of these rigs in
the Haynesville basin. The total number of natural
gas directed rigs in the US is now 105.
The price of ethane was up 5% for the second
week in October and the EIA estimate US ethane
consumption, which was 1.05 million b/d in 2015,
will increase by 50,000 bbl/d in 2016 as expansion
projects at ethylene complexes come online. In
2017 ethane consumption is projected to increase
by 80,000 bbl/d as new capacity comes online at
five new ethylene plants and a previously
deactivated plant. More information on the status
of ethylene cracker projects can be found in
Petrochemical Updates Q3 Quarterly Update.

60

3
50

OIL PRICE $/BBL

40
GAS PRICE $/MMBTU

2
30
24
22 21 20
16 20
16 16 16 15
1 15

10

0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
2016

WTI To Henry Hub Ratio WTI HH