Master limited partnership-related exchange traded products are making a swift rebound as rising crude oil prices helped lift the energy infrastructure space and speculation that the Federal Reserve will hold off rates attracted yield-hungry investors.
Since the September 29 low, both the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ) and Alerian MLP ETF (NYSEArca: AMLP) surged about 21.8%. The two MLP ETPs are closing in on their short-term, 50-day simple moving average.
Energy stocks have been rallying this month on the recovering equities market and rising crude oil prices. Crude oil recently touched a one-month high after an expected tighter oil supply outlook next year. [Oil ETFs Surge]
A monthly U.S. energy report projects global oil demand could jump by the most in six years in 2016 while non-OPEC supply stalls, which suggests that the oil supply glut could be easing more quickly than expected.
Additionally, Russia’s energy minister revealed that the government and Saudi Arabia are in talks over the low oil environment, hinting at possible support.
West Texas Intermediate crude oil futures were hovering around $48.4 per barrel Wednesday, while Brent crude oil futures were trading at $52.0 per barrel.
While MLPs don’t make their money based on oil or gas prices, MLPs have been dragged through the mud, along with other energy equities, as crude oil prices plunged. Unlike other energy sector stocks, MLPs primarily deal with the distribution and storage of energy products, so their business model is less reliant on the commodities market since MLPs profit off the quantity of oil and natural gas they are able to move around. Consequently, MLPs act more like energy toll roads. MLPs also operate under very long-term contracts, so any temporary short-term changes in oil or gas typically have little to no effect on revenue streams.