In the previous part of this series, we looked at the rally of upstream MLPs after OPEC’s (Organization of the Petroleum Exporting Countries) decision to cut crude oil output. Now let’s look at the impact of that decision on US midstream companies.
Crude oil–exposed midstream companies were among the top gainers after OPEC’s decision to cut output. A few crude oil–exposed midstream MLPs rose as high as the upstream players. Plains All American Pipeline (PAA), which is one of the largest crude oil pipeline operators in the United States, rose 11.1% on Wednesday, November 30.
Targa Resources, Enable Midstream Partners (ENBL), Crestwood Equity Partners (CEQP), and EnLink Midstream Partners (ENLK) have crude oil exposure or NGL (natural gas liquids) exposure, mainly through their natural gas midstream businesses. They were all among the top ten gainers among midstream companies, rising 9.7%, 8.7%, 8.5%, and 6.5%, respectively. The Alerian MLP ETF (AMLP), which is comprised of 26 midstream energy MLPs, rose 3.5%.
The expected rise in crude oil prices after the output cut will most likely improve US drilling activity. This improvement indirectly benefits midstream companies through increased throughput volumes.