An ETF for Broad North America Energy Pipeline Exposure

Oil prices are rebounding, with the fundamental outlook improving. As more return to the energy play, investors can consider a broad energy infrastructure exchange traded fund.

On the recent webcast, High Quality MLP Strategy: Understanding the Benefits of Pipeline ETF, Brian Sulley, Vice President of Tortoise Capital Advisors, projects that oil demand will grow in 2016 and 2017 while production declines in the U.S. and Organization of Petroleum Exporting Countries in the future will help diminish the global supply glut.

“We are currently on pace to see global oil supply and demand move into balance during the second half of 2016,” Sulley said.

In a survey of polled advisors on the webcast, 68% of respondents believe the energy sector will perform over the second half of the year, compared to 8% who believe the sector will weaken and 24% who say it will remain flat.

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As energy demand grows and production expands across North America, we will need to lay down additional pipelines to accommodate the growth. For instance, there is a prjoect backlog of about $120 billion in additional pipeline infrastructure.

“With so much supply coming from parts o the country that don’t have a legacy of energy infrastructure, there is continued need for additional pipeline build out,” Sulley said.

While the energy infrastructure space may be associated with crude oil, pipeline companies have been somewhat insulated from volatility in the commodities market. Sulley pointed out that pipeline MLPs saw cash flows as measured by EBITDA increase about 20% in 2015 and nearly all of them maintained or grew dividends.