MLP Hydrocarbon Express 4 January 2019Figure 1: WoW MLP Sub Sector PerformanceFigure 2: QTD MLP Sub Sector Performance
Source:FactSet, Bloomberg, US TreasurySource:FactSet, Bloomberg, US Treasury
Sentiment Update
Sentiment to start the year was mostly in good spirits, it helped that midstream
began the week outperforming with follow through. The outperformance vs the
broader market and utes is interesting if it continues as any increase in weightings
in the respective indexes could result in a continued follow through. We released
our “Where the Puck is Going” report this week with a bullish practical view and
were pleasantly surprised on how little pushback we received, as given the
challenging December, we had expected more pessimism. Many wondered with
tax loss harvesting finally out of the way, could the January trade occur We were
also surprised at the minimal pushback on the capex twilight call and many agreed
with one of the conclusions of shorter cycles and trading positions more often to
generate alpha.Investors like the alternative valuation analysis in LNG but felt it's
well owned. WMB was the top pick inclusion that probably raised the most
eyebrows with most not realizing how much it had fallen relative to its perceived
defensive characteristics. Including TRGP and ET as beta leverage was also well
liked. APU with a ~8% surge by midday on Friday raised a few eyebrows especially
given the warm weather outlook. On the trading front, better to buy but was
mostly hedge funds and covering to begin the week, Friday in particular saw a
surge in hard to borrow names.
-10.1% 3.2%
8 bps -1.6%
-1.5%
3.8% 4.7%
-0.8% 6.6%
8.6% 39.3%
-0.1% 2.3%
4.4% -1.8%
4.4%
-20.0%-10.0%0.0%10.0%20.0%30.0%40.0%50.0%
Henry HubWTI
10-yr USTDJIA
S&P 500
AMZGeneral Partners
CoalMarine Transport
PropaneUpstream
Natural Gas T&SOther Midstream MLP
Liquid T&SG&P
Diversified
-3.5% 1.2%
4 bps -2.7%
-2.4%
2.3% 3.5%
-1.1% 5.2%
13.5% 10.4%
-1.0% 0.3%
2.3% 2.7%
2.7%
-10.0%-5.0%0.0%5.0%10.0%15.0%
Henry HubWTI
10-yr USTDJIA
S&P 500
AMZGeneral Partners
CoalMarine Transport
PropaneUpstream
Natural Gas T&SOther Midstream MLP
Liquid T&SG&P
Diversified
MLP Hydrocarbon Express 4 January 2019NGLs
The NGL barrel at Mt. Belvieu increased 3.1% to $0.561 from $0.544/gal this
week. The NGL barrel at Conway decreased 3.2% to $0.488 from $0.504/gal this
week. The spread between Mt. Belvieu and Conway NGLs widened to $0.073
from $0.040/gal this week. Propane/Propylene inventories decreased 1.6 MMBbls
to 70.7 MMBbls this week driven by a 0.9MMbbls draw in PADD 3 followed by a
0.3MMbbls draw in PADD 4/5. Total US weekly exports of propane decreased to
934 Mbpd from 1,246 Mbpd this week. Seaborne LPG margins were unchanged
at $0.081/gal this week.
Figure 4: Mt. Belvieu NGL Prices ($/gallon)Figure 5: Conway NGL Prices ($/gallon)
Source: Bentek
Note: Prices as of 1/3/2019.
Source: Bentek
Note: Prices as of 1/3/2019.
Figure 6: NAPTHA vs. Ethane (USD/Gallon)Figure 7: Global Propane Prices (USD/Gallon)
Source: Bloomberg
Note: Prices as of 1/3/2019.
Source: Bloomberg
Note: Prices as of 1/3/2019.
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19
EthanePropaneN-ButaneIso-ButaneNatural GasolineNGL Composite
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19
E/P MixPropaneN-ButaneIso-ButaneNatural GasolineNGL Composite
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19
EuropeSingaporeJapanPersian GulfMt. Belvieu Ethane
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19
North AmericaFar East AsiaEurope
Figure 3: LPG Shipping Cost ($/gal)
Source: UBS estimates, Bloomberg, Clarksons
Propane Price (Europe)$0.82
Transportation $0.062
Propane (US)$0.67
Margin $0.081
MLP Hydrocarbon Express 4 January 2019Figure 8: HGL StocksFigure 9: Propane/Propylene Stocks
Source: EIASource: EIA
Figure 10: Propane/Propylene Stocks by PADDFigure 11: Propane Exports
Source: EIASource: EIA
040
60
80
100
120
140
160
180
16111621263136414651
Min/Max '14-'182018201720
40
60
80
100
120
140
160
180
16111621263136414651
Min/Max '14-'182018201720,000
40,000
60,000
80,000
100,000
120,000
12/1506/1612/1606/1712/1706/1812/18
MB
bls
PADD 1PADD 2PADD 3PADD 4&5
50
150
250
350
450
550
650
750
850
950
1,050
1,150
1,250
1,350
16111621263136414651
Min/Max '15-'1820182017。