The midpoint of the year is a good time to enjoy fireworks and reintroduce the Frac Spread, which appears bimonthly in print in Midstream Business and weekly online.

Though less spectacular than the Chrysanthemums, Crosettes and Girandolas that will decorate the sky on July 4, NGL prices have been known to brighten the faces of traders at times. To be clear, the process used to produce the products discussed in this space is fractionation, not hydraulic fracturing; hence, we’re talking frac, as opposed to frack.

Specifically, we’re watching five NGL—ethane, propane, butane, isobutane and C5+ (pentanes-plus or natural gasoline)—at the Mont Belvieu, Texas, and Conway, Kan., hubs. Most NGL in the U.S. are produced from natural gas processing, although about 20% are derived from crude oil refining.

Frac spread chart for July 1. In short, the Frac Spread itself is the measure of profitability for gas plants. It shows the value of NGL as individual components vs. the value if not removed from the natural gas pipeline and sold as fuel.

Though ethane has struggled of late, in general, the individual NGLs are more valuable on the market than on their own.

Daily prices from the two hubs are plugged into a spreadsheet, then averaged out over the week that starts on Wednesday and ends the following Tuesday. Those averages are then calculated to create the “price” of a hypothetical 42-galon NGL barrel based on the share of the market claimed by each product.

Of course, this “barrel” does not exist. You can’t buy it in the marketplace because recreating an NGL barrel would serve no practical purpose. However, it does serve a purpose as a tool to gauge the sector’s market performance.

So, how is the sector performing? Not bad, at least for the time being.

This week, the barrel hit its highest point at Mont Belvieu since mid-May 2015, and the highest at Conway since late April 2015. U.S. gas prices are enjoying a strong rally, with the benchmark Henry Hub chasing $3 per million British thermal units by mid-week.

Note that on the Frac Spread chart, the price of each component is listed along with the shrink. The shrink refers to the portion—in terms of price—that is lost as the liquids are subjected to the movement and high pressure of gathering and processing. The difference is the margin.

NGL prices for July 1. The margin is determined by the average price of the NGL barrel and the average price of natural gas during the week. Data is supplied by Bloomberg and the U.S. Energy Information Administration (EIA), which gathers its information from multiple sources.

On a week-to-week basis, the changes can be rather dramatic. For example, the margin for ethane at Conway during the week ending June 24 was 33 cents per gallon (/gal). This past week, the margin was $1.24/gal, so the increase was 270.28%. At Mont Belvieu, the increase was 59.72%.

The price of ethane hit 23.33 cents/gal, the only time outside of two weeks ago that the price has eclipsed 23 cents since November 2015. Similarly, the ethane price at Conway hit 19.8 cents/gal, shy of the mark two weeks ago, but otherwise higher than any other weekly average since January 2015.

What is remarkable about ethane’s rising price is that several hundred thousand barrels of ethane are rejected each day, meaning that demand for use in petrochemicals is well short of supply. This should change by 2020, as plants like the recently announced Shell petrochemical facility in Pennsylvania begin to come online.

At the moment, though, it’s not enough. With the price of natural gas moving up and insufficient demand for ethane, economics favors burning ethane as fuel.

Resin prices for July 1. For the week, all of the NGL rose strongly—especially ethane at 7.03% at Conway and 9.79% at Mont Belvieu—except for C5+, which dipped 0.08% at Conway.

Propane rose 4.51% at Conway and 4.58% at Mont Belvieu. Butane was up 5.25% at Conway and 4.87% at Mont Belvieu. Isobutane increased less than 3% at Conway and almost 5% at Mont Belvieu.

The way market prices work is that crude oil sets the ceiling, natural gas sets the floor and NGL float in the middle. Whether prices continue on an upward trend depends on the market fundamentals of supply and demand. Supply is tightening and demand is growing, but the market remains out of balance for now.

The weekly natural gas storage report from the EIA was tighter than expected. For the week ending June 24, Bloomberg analysts expected storage to increase by 44 billion cubic feet (Bcf) to 54 Bcf.

The EIA reported an increase of 37 Bcf for a total of 3.14 Tcf. That is 22.8% above the level of 2.558 Tcf reported a year ago and 25.4% over the five-year average of 2.503 Tcf.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.