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Oil Demand May Have Bottomed: What Midstream Investors Need To Know

May 06, 2020 7:00 AM ETENB, EPD, KMI, PBA, TRP, BIPC, ENB:CA, TRP:CA, PPL:CA, BIPC:CA118 Comments


  • Never in history have so many economies shut down all at once. The result has been an estimated peak oil demand decline of -30% in April.
  • The International Energy Agency estimates that, for Q2, oil demand will decline 25 million bpd or approximately 25%.
  • When it comes to the incredible uncertainty facing the entire North American Energy industry, and midstream in particular, you want to go with the largest, most diversified, and financially strongest.
  • Looking for a portfolio of ideas like this one? Members of iREIT on Alpha get exclusive access to our model portfolio. Get started today »

This article was coproduced with Dividend Sensei.

We’ve seen oil crashes before. We’ve seen oil prices rise to excessive degrees as well. It all depends on what economic issues and political pacts are going on in and around the world.

  • What is the U.S. dollar doing?
  • What is OPEC doing?
  • Are there any wars going on and where?
  • How is global business doing?
  • Have there been any new oil discoveries and where?


The answers to those questions all go into determining whether oil is up or down in price. So when huge chunks of the global economy go on break all at the same time that OPEC decides to declare “war” on Russia?

Then you get the worst oil crash in history – one that’s so big and so bad that it’s shocked literally every energy analyst. Because literally no energy analyst – or anyone else – has ever seen anything like this before.

That means talking about it is tricky. But let’s try all the same, starting with (strangely enough) April 20, 2020: a day that will live in infamy.

The cause of that one-day plunge into deeply negative territory had more to do with the unique nature of futures contracts. For the record, no oil companies were actually paying -$38 per barrel for customers to take their oil.

Rather a WTI futures contract means that if you hold it to maturity, you must take possession of 1,000 barrels of crude in Cushing, Oklahoma. Each month, over 100,000 futures contracts representing more than 100 million barrels of theoretical delivery are traded by mostly speculators.

At the end of each month, only those customers (mostly refiners) who need physical oil are left holding contracts. The vast majority cancel out.

So, on April 20th, one day before the

Markets will eventually recover and may reward patient investors...

Investors need to remain disciplined with their investment process throughout the volatility. At iREIT on Alpha, we now offer unparalleled research that now includes a toolkit for the safest midstream MLPs. Subscribe to iREIT on Alpha (2-week free trial).

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This article was written by

Brad Thomas profile picture
Leader of iREIT on Alpha
The #1 Service For Safe and Reliable REIT Income

Brad Thomas is the CEO of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 100,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) iREIT on Alpha (Seeking Alpha), and (2) The Dividend Kings (Seeking Alpha), and (3) Wide Moat Research. He is also the editor of The Forbes Real Estate Investor

Thomas has also been featured in Barron's, Forbes Magazine, Kiplinger’s, US News & World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. 

He is the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, and 2022 (based on page views) and has over 108,000 followers (on Seeking Alpha). Thomas is also the author of The Intelligent REIT Investor Guide (Wiley) and is writing a new book, REITs For Dummies. 

Thomas received a Bachelor of Science degree in Business/Economics from Presbyterian College and he is married with 5 wonderful kids. He has over 30 years of real estate investing experience and is one of the most prolific writers on Seeking Alpha. To learn more about Brad visit HERE.

Analyst’s Disclosure: I am/we are long PBA, ENB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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