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SteelPath commentary on the midstream energy infrastructure industry

October 16, 2024

Latest SteelPath commentary on the Midstream energy infrastructure industry

Each month, the Invesco SteelPath team provides an update and insight on the most recent midstream industry happenings. Each monthly commentary provides:

Market performance update
Recent news
Chart of the month

This month's overview

Midstream equities underperformed the S&P 500 over the month of September as crude oil and natural gas liquids (NGL) prices declined and as midstream M&A activity continued. Natural gas demand growth driven by artificial intelligence (AI) models continued to drive conversations among market participants. While estimates vary, according to Goldman Sachs, data center market share of U.S. power demand may grow from 3% to 8% by 2030 driving 3.3 to 6.1 billion cubic feet per day (bcf/d) of incremental demand for natural gas¹.

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Commentary archives

September 2024

August 2024

June 2024

May 2024

April 2024

March 2024

February 2024

January 2024

December 2023

November 2023

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Source: All data sourced from Bloomberg L.P. as of 9/30/2024 unless otherwise stated.
1
Goldman Sachs, “Generational Growth AI, data center and the coming US power demand surge” 4/28/24

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Midstream equities are represented by the Alerian MLP Index.

Midstream MLPs, as measured by the Alerian MLP Index (AMZ), ended September down 0.3% on both a price basis and after distributions are considered. The AMZ underperformed the S&P 500 Index’s 2.1% total return for the month.

An investment cannot be made into an index. Past performance does not guarantee future results.

The Alerian MLP Index (AMZ) The Alerian MLP Index is the leading gauge of energy infrastructure Master Limited Partnerships (MLPs). The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis (AMZX).

The opinions referenced above are those of the author. These comments should not be construed as recommendations but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. The opinions are based on current market conditions and are subject to change. They may differ from these of other Invesco investment professionals.

Most MLPs operate in the energy sector and are subject to the risks generally applicable to companies in that sector, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk. MLPs are also subject to the risk that regulatory or legislative changes could eliminate the tax benefits enjoyed by MLPs, which could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the portfolio’s investments. Although the characteristics of MLPs closely resemble a traditional limited partnership, a major difference is that MLPs may trade on a public exchange or in the over-the-counter market. Although this provides a certain amount of liquidity, MLP interests may be less liquid and subject to more abrupt or erratic price movements than conventional publicly traded securities. The risks of investing in an MLP are similar to those of investing in a partnership and include more flexible governance structures, which could result in less protection for investors than investments in a corporation. MLPs are generally considered interest-rate-sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns.

Energy infrastructure MLPs are subject to a variety of industry-specific risk factors that may adversely affect their business or operations, including those due to commodity production, volumes, commodity prices, weather conditions, terrorist attacks, etc. They are also subject to significant federal, state and local government regulation.