The Outlook for MLPs Is a Little More Encouraging

Creepy. Scary. The plunge in oil prices over the past 13 months, along with the collapse of just about any investment even vaguely related to petroleum, has created a skin-crawling, palm-sweating horror show. But the last frame of the movie may come sooner than you think. On the face of it, last week’s action in the oil pits seemed to tell the same old disaster story. West Texas crude for September delivery was settling in the $44 area, and marked a low close last seen in mid-March.

However, oil equities have shown at least some resilience. Last week, as oil was touching those lows, the Energy SPDR (XLE) was up 1.6%, and the battered Alerian MLP Index closed well off its morning lows. This is the type of positive divergence (producer stocks stable or higher, raw material lower) you see when oil is attempting to make a firm bottom. Meanwhile, I’m encouraged by a comment last Tuesday from David Rubenstein, billionaire co-CEO of the Carlyle Group, a private equity firm. In an interview with CNBC, Rubenstein — whose organization has successfully backed energy projects worldwide for decades — said: “In time, (oil) prices will come back, in time demand will catch up with supply, and in time I do believe that carbon-related energy will turn out to be one of the best investments in the world.”

Source: InvestorPlace

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