Arbitrage is one of the simplest ways to make big money. Take something worth little and move it to a place where it’s worth a lot.
In the past, such strategy has made billions for oil traders. Moving crude from developing nations with big production but little domestic market to energy-hungry buyers in North America, Europe and Asia.
But that’s getting harder to do in today’s globalized oil market. Crude today can sail between nearly any two points on the globe-very efficiently. Which has closed a lot of the big geographic differentials in pricing.
So, where to next?
Many investors have focused on the arbitrage opportunities in natural gas. After all, U.S. natgas is going for $4 per mcf, while the same unit in Asia would fetch $15.
That’s indeed an attractive pricing opportunity. The challenge is logistics. America isn’t set up to export gas in large quantities. Doing so requires myriad permitting, and the construction of new facilities to liquefy and load gas supplies.
That means big profits here are likely still years away. But there’s one little-known market that’s beckoning with triple-digit arbitrage upside-one where the gains are already happening, under the nose of the investing public.
Natural gas liquids, or NGLs.
NGLs prices have grown to big differentials in Europe and Asia versus America. Just look at propane. While prices in the U.S. are currently…To read the rest of this article Start a FREE subscription to our premium publication
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