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MLP Week Thoughts: When Flat Feels Great

|Includes: CMLP, ENB, Enterprise Products Partners L.P (EPD), NKA

MLPs were up slightly this week overall, but it has rarely felt better, with falling stocks and commodities (even gold) dropping.  The S&P 500 was down 4 out of 5 days and 48.2 points (3.8%) on the week. 40+ of those points happened on consecutive 20 point decline days on Wednesday and Thursday.  MLPs, on the other hand, shook off the largest equity issuance week of all time last week, and in spite of a decidedly risk-off week, managed to finish 0.8% higher. The chart below shows how week over week, year over year, and since the April 28 peak for the MLP index, MLPs have separated themselves from the broader stock market, certainly aided by declining interest rates.

The chart below highlights the extent to which MLPs moved in the opposite direction of stocks this week.  With a short (and likely limited volume) week upcoming, I expect MLPs to join the correlation party again, and track stocks closely this week, again bouncing around at the whim of the European sovereign debt market and whatever news comes out of Washington DC and the Super Committee.

Seaway Goes the Other Way

The biggest news items of the week in the energy space were the two announcements made by Enbridge, Inc. ($ENB) on Wednesday.  The first: that ENB will purchase 50% interest in Seaway crude pipeline system from ConocoPhillips for $1.15 billion (press release).  The second: that ENB and Enterprise Products Partners ($EPD), which owns the other 50% of Seaway, would reverse the direction of the crude flowing through Seaway and start transporting up to 150k barrels/day in the second quarter of 2012 (press release), at a cost of $300 million.  EPD went on to announce on Wednesday that EPD and ENB would discontinue their joint effort to develop the Wrangler pipeline, which was going to have 800k barrels/day of capacity and looked to be ahead in the race to de-bottleneck Cushing's crude supplies.  Smart, cheap moves by ENB and EPD....

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