Propane is a by-product of natural gas processing and oil refining. National demand is about 1 million barrels per day, roughly one-third that of heating oil.

Propane is characterized bv its diveristy of uses: from residential cooking to crop-drying in agriculture to space heating in homes. One of its largest markets is as a feedstock for the production of petrochemicals, such as benzene, propelene, phenol, and acetone. Natural gas utilities often store propane for use during periods of peak demand.

The NYMEX propane contract provides an effective pricing and risk management tool for the gas liquids sector of the energy industry, comparable to the other successful NYMEX energy contracts. Propane futures benefit from the avilability and expertise of active energy futures traders and appeal to commercial participant: gas processors, multi-state and local propane marketers, gas liquids traders, and petrochemical manufacturers. Companies that use propane in general manufacturing operations often are faced with situations in which increases in raw material, processing, or manufacturing consts can't be passed on to the price of the finished products. Hedging at least part of the production costs can help a manufacturer stabilize his anticipated margins.

The propane contract is a natural complement to the NYMEX heating oil, crude oil, unleaded gasoline, and natural gas futures contracts.