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Commodity Price Outlook for 2014

By Elliott H. Gue on Dec. 24, 2013

The oil and gas industry’s stampede into liquids-rich basins has catalyzed a dramatic upsurge in domestic NGL output. In 2012 US field-plant production of NGLs averaged 2.41 million barrels per day, up 8.3 percent from a year ago and 34.5 percent from five years ago.

This robust growth has continued into 2013, with NGL output up 5.6 percent from year-ago levels through the first nine months of the year.

And the December edition of the Energy Information Administration’s Short-Term Energy Outlook calls for US production of these commodities to average 2.53 million barrels per day this year and climb to 2.6 million barrels per day in 2014.

Overall, we expect NGL prices to remain flat to slightly higher from the levels that prevailed at the end of 2013, with any meaningful improvement unlikely until after 2015, when new downstream projects should help to bolster demand.

At this juncture, investors should pay closer attention to opportunities on the demand side of the equation–export terminals and petrochemical capacity–that will help to balance the market and support drilling activity in the major shale oil and gas plays.

Before we highlight our favorite names to play these trends, let’s take a closer look at the unique supply-demand dynamics in the market for each of these hydrocarbons.

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