Midstream has remained resilient as oil prices have fallen in recent weeks.
Despite weakening oil prices, the midstream segment has remained defensive and has held up better than other energy subsectors.
Midstream is less sensitive to moves in commodity prices given its fee-based business model, which supports stable cash flows. Additionally, the generous income offered by midstream investments can help offset some of the volatility.
See more: The Investment Case for Midstream ETFs: Attractive Valuations and Strong FCF
West Texas Intermediate (WTI) crude, the U.S. benchmark, has dropped 13.6% since the end of July. WTI is now trading at $67.31 a barrel as of Sept. 11, compared to $77.91 a barrel on July 31.
During the same period, broader energy, as measured by the Energy Select Sector SPDR Fund (XLE ), has declined 7.0%.
Meanwhile, the midstream segment, represented by the Alerian MLP ETF (AMLP ) and the Alerian Energy Infrastructure ETF (ENFR ), has limited any losses. ENFR climbed 2.2% between Aug. 1 and Sept. 11, while AMLP held relatively steady, giving up just 0.9%.
Under the Hood of ENFR and AMLP
ENFR tracks the Alerian Midstream Energy Select Index (AMEI). The index is a composite of North American midstream energy infrastructure companies, comprising MLPs (25%) and corporations (75%).
See more: "Comparing Energy Infrastructure ETFs: MLPX vs ENFR”
AMLP tracks the Alerian MLP Infrastructure Index (AMZI), a composite of energy infrastructure MLPs. Companies in the index earn most of their cash flow from midstream activities.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP and ENFR, for which it receives an index licensing fee. However, AMLP and ENFR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP and ENFR.
