A recent WSJ article highlighted a little talked about segment of the natural gas market that has grown as a result of the boom in domestic oil and gas production.
The article discusses how trading in Natural Gas Liquids (NGLs) such as Propane, has picked up significantly over the last year.
These historically small, illiquid markets have finally reached a point where larger investors and hedge funds are beginning to dip into these products.
The growth in trading volumes has accompanied a significant growth in production (up 60% in the last decade) as cheap natural gas is processed into NGLs.
What are Natural Gas Liquids (NGLs)
They include propane, butane, ethane, isobutane, and natural gasoline and are commonly used as cooking fuel (propane grills), lighter fuel (butane), and less commonly known as feedstocks in plastic and chemical production.
NGL production has reached 3 million barrels / day, a 60% growth in volume over the past decade. Propane futures trading volumes have correspondingly risen 18% in the first half of 2014 relative to the same period a year ago.
Since just May, the market has tripled in size to $2.8 billion, according to The Intercontinental Exchange (ICE).