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During the initial phase of the pandemic, when vaccines were unavailable, the world faced significant uncertainties. Crude oil prices experienced an unprecedented plunge, dropping to a negative $36.98 per barrel on April 20, 2020. However, the rapid development and rollout of vaccines facilitated the gradual reopening of economies, leading to a remarkable recovery in the pricing of West Texas Intermediate (WTI) crude, which soared to $123.64 per barrel by March 8, 2022. Oil price data are per the U.S. Energy Information Administration.
Currently, WTI crude oil is trading at more than $70 per barrel. This highlights the inherent exposure of most energy companies to extreme volatility in commodity prices. Therefore, it is prudent for investors to keep an eye on midstream stocks, such as Kinder Morgan, Inc. KMI, MPLX LP MPLX and The Williams Companies, Inc. WMB.
Fueling Resilience: The Power of Midstream Business
Although the fate of energy players is highly dependent on oil and gas prices, stocks in midstream space have lower exposure to volatility in commodity prices than oil and gas producers. This is because midstream players generate stable fee-based revenues since the transportation and storage assets are being booked by shippers for the long term. Hence, their business model is relatively low-risk, which indicates considerably less exposure to oil and gas prices and volume risks.
We have employed our Stock Screener to zero in on three stocks belonging to the midstream energy space that are well-poised to gain, and hence, investors should keep an eye on these stocks. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Must-Watch Stocks
Kinder Morgan: With its operating interests in oil and gas pipeline networks spread across 83,000 miles, KMI is a leading energy infrastructure company in North America. It derives most of its earnings from take-or-pay contracts, generating stable fee-based revenues.
Kinder Morgan is poised to grow due to its business model, which is relatively resilient to volume and commodity price risks. These positive developments are reflected in the stock’s upward earnings estimate revisions for 2025 in the past 30 days.
MPLX: The firm has ownership and operating interests in midstream energy infrastructure and logistics assets, generating stable cashflow. The partnership has a strong focus on returning capital to unit holders. Under its unit repurchase authorization, the partnership has yet to buy back the remaining $620 million of its units. In 2025, MPLX will likely see earnings and sales growth of 2.4% and 4.5%, respectively.