Quarterly North American Midstream Energy Commentary: June 2019

The midstream space, which is measured by the Alerian MLP Index, finished the second quarter slightly positive despite the volatility we experienced in April and May.  At the end of the quarter the estimated dividend yield was about 7.98%; well above the 10-year index average of 6.9%.  In terms of total return, this marked two straight positive quarters and four positive quarters out of the last five.

The instabilities we experienced during the second quarter were driven by two very different macro themes.  From a domestic standpoint, crude oil production is near its all-time high.  The U.S. is producing over 12 million barrels per day and there are continued reports about a weakening outlook for increased global demand.  Secondly, tensions around the Persian Gulf have continued to increase as the U.S. and Iran continue their saber-rattling.  It is estimated that up to 1/5 of the daily global oil consumed is shipped through the Persian Gulf.  The net impact of these two opposing forces has caused some unusual swings in the price of oil during the quarter, with the price declining at the beginning, only to move back up at the end of the quarter…

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