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.
WSJ: Shale Shines Light on Natural Gas Liquids
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)
Natural gas liquids are by-products separated from natural gas and crude oil in field processing facilities.
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).
Don’t know much about NGLs?
We’ve got you covered.
Learn more about NGLs with EKT Interactive’s Natural Gas Fundamentals Module, a section of our Oil 101 – a free introduction to Oil and Gas.
Related Article: Upstream vs. Downstream
Read more about the difference between upstream and downstream segments of the oil and gas industry. Join the Oil 101 learning community today to learn more.
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