Author: Hinds

Even with a full complement of tailwinds at play this week, midstream trading was choppy and the week ended with minimal gains.  Those tailwinds include: strong broad stock market (S&P 500 up for 5 straight days), oil price gains, spiking NGL prices, and wide location differentials for oil and NGLs.  The big tailwind that’s missing: investor enthusiasm, interest or even acknowledgement.

It was a rough start to the school year all over the market.  MLPs and U.S. midstream corporations outperformed a weak broad market and held up much better than energy stocks.  But after the last few weeks, languishing midstream stock performance was still a disappointment.  The broad midstream index (AMNA) was in-line with the S&P 500, dragged down by heavy Canadian exposure that underperformed.

Midstream had a rough week, the worst since late March and 4th worst so far this year.  Oil prices rallied for a second straight week, NGL prices were sharply higher, the broad stock market was higher again, but midstream and MLPs lagged badly.

This week, Midstream stocks were little changed and basically kept pace with the S&P 500, which hit a new all-time high for the first time since January.  Midstream stocks didn’t get additional lift from the first positive week for oil prices in two months, but it certainly didn’t hurt.  Trading volume was light across midstream, with a few exceptions, and should be even lighter next week.

The string of successive positive weeks for midstream ended this week, Midstream stocks were down roughly 1% across MLP and midstream indexes. Canadian Midstream stocks outperformed for the first time in a while. Utilities had a very strong week and the S&P was slightly positive. Oil prices continue to languish, now down 7 straight weeks, while natural gas prices continue to hold firm.

Midstream traded up for a 6th straight week, with MLPs again out front with a 2.2% total return.  The MLP Index’s YTD total return is now nearly 12% after being negative less than a month ago.  The broad market struggled a bit, and midstream was a safe place to hide on Friday when the broad market sold off on Turkey’s currency plunge.

Midstream made gains for a 5th straight week, again led by MLPs.  It was the best week for the MLP Index since January 2017.   Good vibes and momentum carried through from last week with strong results from EPD, OKE and ENB among others, punctuated by the earlier than expected ETE/ETP simplification.  After this week’s move, the MLP Index has produced total return of 11.3% since June 25th.

The MLP Index produced 6.6% total return in July, the best July since 2010.  Looking ahead, August has been negative in each of the last 3 years and 7 of the last 9.  For the MLP rally to continue, the stocks would need to counter these seasonal headwinds that typically restrain MLP buying late in the summer.

Midstream outpaced the broad market and posted a fourth straight positive week.  MLPs again led the way, with a 1.5% gain.  The MLP Index is up 4.7% over those 4 weeks.  The Alerian Midstream Energy Index (AMNA), the most inclusive midstream index, was up 0.9% and has posted a year over year total return of 0.1%, slightly ahead the Alerian MLP Index.