Viewpoint: US butane production to rise in 2022

US butane production is expected to continue rising through 2022 as crude and natural gas output rebounds to pre-Covid levels.

As restrictions ease and vaccination levels continue rising, producers anticipate weaker economic effects from new variants of the coronavirus, creating a more stable environment for producers to continue increasing output.

The US Energy Information Administration (EIA) anticipates a temporary slowdown in oil demand due to the new Covid-19 Omicron variant, but the variant is not expected to overturn the current recovery, according to the EIA's latest Short-Term Energy Outlook. The EIA estimates natural gas production will increase to 96Bcf/d in 2022, a 3pc increase over 2021.

Gains in crude and natural gas production will bolster natural gas liquids (NGL) production from gas processing next year. NGL production from US gas processing totaled 5.35mn b/d in the year through November, with the EIA's December forecast raising the average to 5.37mn b/d. In 2022, the EIA forecasts NGL output to increase to 5.84mn b/d, up by 8.8pc from the 2021 forecast.

US butane from gas processing is expected to average 913,540 b/d in 2021 and to rise next year by 5.3pc to 962,120 b/d, according to the EIA.

US butane exports were a key demand driver in 2021, hitting a record high 472,000 b/d in April as the arbitrage to Asia remained strong and many countries continued to face work from home orders, driving retail demand for butane. As restrictions eased, exports fell, approaching year earlier levels in September at 343,000 b/d.

Mont Belvieu, Texas, EPC butane prices averaged 117.625¢/USG through the first 11 months of 2021, double the average prices in all of 2020 and up by 81pc from the 2019 average. As a percentage of Nymex WTI, butane averaged 72.3pc of the value of crude in 2021, up by 9.7 percentage points from 2020 and 24.3 points over 2019.

By Ethan Stafford