What Factors Determine NGL Pricing?

NGL pricing is cyclical. The primary consumer of natural gas liquids – the petrochemical industry – plays an integral part in determining market prices. This is especially true in the case of ethane, which accounts for approximately 40% of the NGL stream. Consumers bid for natural gas liquids according to the price differential between NGLs and gas prices. In times of strong demand, this differential grows, resulting in gas processors pulling more ethane out of the natural gas stream.

 

Increased production drives down NGL prices, leading gas processors to leave ethane in the stream. This process, known in the industry as ‘ethane rejection‘, yields an increase in the physical volume of natural gas and a subsequent decrease in its price. The lower price of natural gas results in reduced NGL production, which bumps up the price of natural gas liquids. This trend then repeats itself, as is demonstrated in the graphic below.

Targray’s team of NGL marketing professionals are focused on securing reliable and cost-effective rail, barge, truck, and pipeline access. Our long-standing relationships with natural gas producers, midstream companies and other industry stakeholders enable us to help customers in several markets unlock value while minimizing supply chain risk.

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