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How Changing Energy Demand Impacts MLPs’ Throughput Volumes


Dec. 4 2020, Updated 10:53 a.m. ET

US energy demand

In the previous article, we looked at how expected growth in the US energy supply could boost the MLPs’ throughput volumes. In this article, we’ll analyze the impact of growth in US and global energy demand.

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Crude oil demand

US crude oil stocks are still high compared to their historical averages due to lower inventory draws. A faster US inventory draw driven by higher crude oil consumption is expected to boost crude oil prices. Higher crude oil prices should result in higher crude oil production.

Also, higher inventory draws are expected to benefit the demand pulls of liquids pipeline and terminaling MLPs that supply crude oil to refineries, industries, and other end users. These MLPs include Shell Midstream Partners (SHLX), Valero Energy Partners (VLP), and Buckeye Partners (BPL).

Natural gas demand

US natural gas demand is expected to rise in the coming years, driven by increased consumption by power utilities, industries, and LNG (liquefied natural gas) exports. This is expected to result in higher demand-pull throughout volumes and higher US natural gas prices.

According to the recent STEO (Short-Term Energy Outlook) report by the U.S. Energy Information Administration, natural gas consumption is expected to rise to 75.7 Bcfpd (billion cubic feet per day) in 2016 and 76.0 Bcfpd in 2017, compared to 74.8 Bcfpd in 2015.

Higher natural gas demand is expected to benefit MLPs focused on demand-pull organic projects, including Williams Partners (WPZ) and Boardwalk Pipeline Partners (BWP).


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