Master limited partnership-related exchange traded products surged Thursday after data revealed a slightly lower-than-expected rise in crude oil inventories and optimism over increased dividends and buybacks from Kinder Morgan (NYSE: KMI).
On Thursday, the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ) and Alerian MLP ETF (NYSEArca: AMLP), the two largest MLP-related ETPs in the space, rose 5.3% and 6.4%, respectively, as West Texas Intermediate crude oil futures jumped 6.2% to $30.1 per barrel. The United States Oil Fund (NYSEArca: USO), which tracks WTI crude oil futures, was 4.1% higher Thursday.
Oil prices rebounded Thursday after the U.S. Energy Information Administration revealed inventories grew by four million barrels last week, or less than the 4.6 million barrel increase the industry group American Petroleum Institute had previously anticipated, the Wall Street Journal reports.
“The market was expecting something worse, so we could see a modest” lift, Bart Melek, head of commodity strategy at TD Securities, told the WSJ.
MLPs are not directly affected by oil prices since the sector acts more like an energy toll road and profits off crude oil flowing threw its pipelines. However, the recent selling pressure in the energy market spilled over to MLPs as traders feared the low prices would force producers to cutback on production, which would mean less volume going through MLPs.