MLPs’ correlation with crude oil
MLPs generally don’t have direct crude oil exposure, due to their fee-based businesses. However, natural gas processing and commodities marketing result in high direct crude oil exposure. MLPs involved in natural gas processing have direct exposure to NGL (natural gas liquid) and natural gas prices due to contract type. In turn, NGL prices are linked to crude oil prices.
In this series, we’ll look at the ten MLPs most correlated with crude oil amid crude oil price volatility. For an update on crude oil prices, read Is It the Beginning of the Bear Market for Crude Oil Prices?
The top ten MLPs, according to their correlation with crude oil, are as follows:
- EnLink Midstream (ENLC)
- DCP Midstream (DCP)
- Mid-Con Energy Partners (MCEP)
- Plains GP Holdings (PAGP)
- Hi-Crush Partners (HCLP)
- Crestwood Equity Partners (CEQP)
- EnLink Midstream Partners (ENLK)
- Golar LNG Partners (GMLP)
- Genesis Energy (GEL)
- Tallgrass Energy GP (TEGP)
We’ll look into their correlation with crude oil and their crude oil exposure throughout this series.
AMLP versus crude oil
The Alerian MLP ETF (AMLP), which comprises 25 energy MLPs, has a strong correlation with crude oil. AMLP’s one-year correlation with crude oil was 0.51 as of October 6, 2017. Among AMLP constituents, DCP Midstream has the highest correlation with crude oil, while Rice Midstream Partners (RMP) has the lowest. In the next article, we’ll look into EnLink Midstream’s correlation with crude oil.