JPM-JPM Natural Gas and NGL Reservoir Taking a Closer Look at NGL Fundamentals...-20250912

JPM View: We have updated our Natural Gas Reservoir report to now include keyNGL fundamental charts given the growing importance of the liquids macropicture to our coverage. Earlier this year, tariff escalations between China and theU.S. drove significant questions on the commodity price outlook, with NGLsgaining particular attention given the interdependence between the two countries.For context, in 2024, Chinese demand represented ~25% of global LPG demand,46% of U.S. ethane exports, and 18% of U.S. propane exports, according to EIAdata. Overall, we have seen little impact to U.S. propane exports this year, asmarket efficiencies have resulted in the redistribution of barrels to address globaldemand, with more U.S. NGL barrels having shifted to India, Indonesia, and Japan,while China has increased its imports from the Middle East. As a result, we haveobserved a step up in U.S. propane export trends, with YTD exports trending 4%above 2024 levels. On a quarterly basis, propane exports averaged 1.86 MMBo/dover 2Q25, which is 1% above 1Q25 levels and 4% higher YoY. That said, we donote that export trends have taken a step back in 3Q25, down 4% to 1.78 MMBo/dthrough the first week of September.

Despite relatively strong export trends, we have seen a material increase in U.S.propane inventories over the summer, with inventory levels now 11% above thefive-year average and 1% below the top-end of the five-year range. Assuming thesame weekly injections/withdrawals as the five-year average, the U.S. would endthis year with propane inventories 12% above the five-year average. Against thisbackdrop, propane prices are now trading at ~68c per gallon, or ~45% of WTI,which is down ~16% vs. levels at the start of the summer and 20% since thebeginning of the year. Looking at international pricing, we note that EU and FEIspreads have rebounded considerably since the end of April, currently at ~$0.20/gal and $0.34/gal from $0.04/gal and $0.15/gal, respectively, though still belowlevels entering the year. For additional details on propane fundamentals and otherNGL products such as ethane, butane, isobutane, and natural gasoline, please seeFigure 91 through Figure 120 , which we will continue to update in future Reservoirnotes.