MLP Rally Continues: Alerian MLP Index in Green for Fourth Week



AMZ rose 1.5% last week

The strong positive momentum for MLPs continues. The Alerian MLP Index (or AMZ), which includes 44 energy MLPs, ended in the green last week for the fourth consecutive week. It rose 1.5% to end at 274.9.

Of the 93 MLPs, 51 ended in the green, six remained unchanged, and the remaining 36 ended up in the red last week. Among the top MLPs, MPLX (MPLX), Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Williams Partners (WPZ) rose 3.6%, 2.3%, 1.9%, and 1.2%, respectively. The Alerian MLP ETF (AMLP), which is comprised of 26 energy MLPs, rose 1.5%.

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The recent rally for MLPs could be attributed to strong support for crude oil at $68 per barrel and the recent FERC (Federal Energy Regulatory Commission’s) finalization of a policy rule related to the treatment of income taxes for interstate natural gas pipeline operators. The final rule provides some relaxation for MLPs.

The recent decline in crude oil prices shouldn’t be a reason for midstream companies to worry as they wait for drilling activity to stay strong. US crude oil ended 2.5% lower last week at $68.70 per barrel. For a recent update and outlook on crude oil prices, read Crude Oil: Tracking Crucial Drivers.

Will MLPs continue to rally?

Robust drilling activity, strong earnings announcements, and the recent FERC boost might continue to drive positive momentum in MLPs this week. Enterprise Products Partners, the largest MLP in terms of market capitalization, is scheduled to report its second-quarter numbers this week. For a pre-earnings review, read Enterprise Products Partners’ Upcoming Q2 2018 Earnings.

On the other hand, weakness in crude oil prices going forward and a rise in US Treasury yields ahead of the FOMC (Federal Open Market Committee) meeting could weigh on MLP performances this week. The US ten-year Treasury yield rose to the month’s high of 2.98% last week due to the narrowing of the AMZ-Treasury spread.

In the next part of this series, we’ll look at the WTI Cushing–WTI Midland spread and its impact on MLPs.


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