A Cautious Call on MLPs

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 have historically shown a weaker correlation to energy prices over longer periods as MLPs act more like energy toll roads, profiting on the volume of oil moving through their pipelines.

Bolstering the long-term case for MLPs, some analysts believe that oil levels are sustainable at over $45 per barrel based on current costs. Meanwhile, Saudi Arabia’s costs are above $100 a barrel, which are being undercut by the nascent shale oil hydraulic fracturing or fracking industry where average costs are about $65 to $70 a barrel.

Alerian MLP ETF