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MLPs Rallied despite Crude Oil’s Weakness Last Week

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AMZ rose 2.7% last week

MLPs rallied despite crude oil’s weakness last week. The Alerian MLP Index (^AMZ), which includes 50 energy MLPs, rose 2.7% during the week and ended at 269.1. At the same time, US crude oil fell 3.0% and ended at $65.8 per barrel. Crude oil prices fell due to strong US production growth, higher US crude oil inventories, and fears of an increase in crude oil supplies from Saudi Arabia and Russia. For a recent update on crude oil, read US Crude Oil inventories Could Impact Oil Futures.

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Out of the total 90 MLPs, 63 ended in the green, three remained unchanged, and 24 ended in the red last week. Among the top MLPs, Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Plains All American Pipelines (PAA) rose 5.4%, 3.5%, and 2.6%, respectively. In contrast, Williams Partners (WPZ) fell 0.7%.

The Alerian MLP ETF (AMLP), which is comprised of 25 energy MLPs, rose 2.8%. At the same time, the Energy Select Sector SPDR ETF (XLE) and the SPDR S&P 500 ETF (SPY) rose 2.7% and 1.7%, respectively.

Last week, MLPs’ rally could have been due to strong US drilling activity and the wider WTI-Brent spread. The wider spread forced producers to move their supplies to storage and exports hubs, which drove midstream MLPs’ throughput volumes higher.

Will the trend continue this week?

MLPs might continue to trend higher this week due to strong US drilling activity and a slight decline in US Treasury yields. A rise in production activity drives midstream MLPs’ throughput volumes. According to Baker Hughes, the total US rig count increased by one to 1,060 by the end of last week—compared to the previous week. The current rig count is 68 higher than the levels during the end of the first quarter of 2018.

Fund inflows

AMLP saw a net inflow of $20.3 million funds last week, while the J.P. Morgan Alerian MLP Index ETN (AMJ) saw a net outflow of $234.7. Overall, AMLP and AMJ have seen a net inflow of $71.6 million and $2.0 million since the beginning of this year.

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

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