Infrastructure: GCX’s June 10 expansion shifted Permian ethane economics by moving Waha gas prices into positive territory, reducing the economic advantage of ethane recovery.
Exports: NGL exports declined 14.5% W-o-W for the week ending July 10, with both ethane and LPG exports pulling back.
Rigs: The total US rig count increased by 2 rigs to 577 for the week of July 4. Liquids-driven basins increased from 446 to 447 rigs.
Flows:
Calendar:
Infrastructure:
The commissioning of the GCX expansion on June 10 marked a structural shift in Permian ethane economics. Waha natural gas prices have moved from persistently negative territory to positive values, effectively raising the floor for Permian ethane prices. During the period of negative gas prices, ethane recovery was almost always economic. That regime has changed.
Today, the natural gas value chain is increasingly competing with the petrochemical value chain for the same molecule.
Whether ethane is recovered or rejected is determined by the frac spread, the economic relationship between the value of selling ethane into the petrochemical market versus leaving it in the natural gas stream. East Daley calculates the Permian frac spread using the Waha natural gas price and the Mont Belvieu ethane price, net of an average transportation and fractionation (T&F) cost required to move ethane from the Permian to Mont Belvieu. The resulting forward frac spread, shown below in cents per gallon (cpg), provides a forward-looking signal for recovery economics.
When the frac spread (blue line) falls below the T&F threshold (orange line), rejecting ethane becomes the more profitable option. The forward curve begins sending a rejection signal in November 2026 that extends into early 2027. For much of 2027, the market remains finely balanced, with recovery favored during the shoulder seasons while rejection becomes increasingly attractive during periods of stronger natural gas demand in the summer and winter.
At the same time, the demand outlook is becoming increasingly certain.
Golden Triangle Polymers is expected to add approximately 113 Mb/d of incremental ethane demand as its new Gulf Coast cracker ramps up. Meanwhile, 2027 is expected to be a record year for very large ethane carrier (VLEC) deliveries. East Daley projects global ethane shipping capacity to roughly double by the end of 2028, allowing export demand to continue expanding as marine logistics become less constrained.
Taken together, these trends point to a structural tightening of the ethane market.
The market has only one mechanism to restore equilibrium. As stronger Waha prices encourage ethane rejection while domestic and export demand continue to grow, ethane supply available to petrochemical consumers tightens. The market must then bid up the value of ethane until recovery once again becomes economic. In other words, higher natural gas prices create a higher floor for ethane prices.
This marks a fundamental shift from the market dynamics of the past decade. Historically, abundant Permian supply and constrained Waha pricing allowed ethane to trade at deep discounts, preserving the Gulf Coast’s feedstock advantage. Going forward, that assumption becomes increasingly difficult to support. Ethane will no longer be priced simply as a byproduct of natural gas production, it will increasingly be valued as a strategic petrochemical feedstock competing directly with the natural gas value chain.
Integrated midstream companies add another layer of complexity. Operators such as Phillips 66 have committed to supplying Golden Triangle Polymers through fully integrated gathering, processing, pipeline, fractionation, and delivery systems. As a result, there may be periods when frac spread economics favor rejection, yet integrated operators continue recovering ethane to satisfy downstream contractual commitments. Those commitments may delay the market response, but they do not eliminate the underlying imbalance. Ultimately, the market will still require higher ethane prices to incentivize enough recovery to satisfy growing domestic cracker demand and expanding export markets.
The era of cheap ethane is ending. The next phase of the market will be defined not by how much ethane the Permian can produce, but by how much the market is willing to pay to recover it.
Exports:
NGL exports declined 14.5% W-o-W for the week ending July 10, with both ethane and LPG exports pulling back.
ET Nederland was the sole exception on the LPG side, growing 33.9% W-o-W. However, exports fell at all other terminals, resulting in a 15.5% decrease in total LPG exports W-o-W.
On the ethane side, EPD Neches River resumed exports after reporting zero for two consecutive weeks, and ET Marcus Hook rebounded (+30%) from the prior week. These gains were offset by drops at EPD Morgan’s Point (-10.3%) and ET Nederland & Orbit (-55.3%), resulting in a 10.3% W-o-W decrease in total ethane exports.
Rigs:
The total US rig count increased by 2 rigs to 577 for the week of July 4. Liquids-driven basins increased from 446 to 447 rigs.
- Anadarko (-1): Reach Oil & Gas Co.
- Permian (+1)
- Delaware (+2): Jetta Operating; Petroplex Energy Inc.
- Midland (-1): Tischer Energy, LLC
- Uinta (+1): Uinta Wax Operating, LLC
Flows: N/A
Calendar: N/A