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MLPs Recovered Slightly amid Strong Crude Oil Gains

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AMZ rose 3.5% last week

The Alerian MLP Index (^AMZ), which includes 50 energy MLPs, recovered slightly last week from its 2018 lows with week-over-week gains of 3.5%. AMZ was supported by strong gains in crude oil prices and a general recovery in US markets after the trade war tensions eased. MLPs had a strong start last week. However, the gains were slightly offset by declines on Thursday and Friday.

US crude oil rose 8.6% last week and ended at $67.4 per barrel. Geopolitical tension increased due to the crisis in Syria. For a recent update and outlook on crude oil prices, read Why Geopolitical Factors May Not Ease for Oil Soon.

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Out of the total 92 MLPs, 73 ended in the green, five remained unchanged, and 14 ended in the red. Among the top MLPs, Enterprise Products Partners (EPD), Plains All American Pipelines (PAA), Williams Partners (WPZ), and Energy Transfer Partners (ETP) rose 6.4%, 3.7%, 3.2%, and 3.1%, respectively. The Alerian MLP ETF (AMLP), which is comprised of 25 energy MLPs, rose 3.6%.

YTD performance

Overall, AMLP has lost 10.2% since the beginning of this year. At the same time, the Energy Select Sector SPDR ETF (XLE) and the SPDR S&P 500 ETF (SPY) have fallen 1.2% and 0.6%, respectively. AMLP is underperforming XLE and SPY by 900 basis points and 960 basis points YTD (year-to-date).

MLPs’ relative underperformance relative to broader US markets and the energy sector could be attributed to some recent sector headwinds including the FERC ruling on the income tax policy, regulatory hurdles, and continued weakness in drilling activity in some US regions. Kinder Morgan (KMI), a US midstream energy giant, recently suspended work on its ambitious Trans Mountain Pipeline project due to regulatory delays. Read What’s Next for Kinder Morgan’s Trans Mountain Expansion Project? to learn more.

Next, we’ll discuss the top MLP gainers last week.

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