Data as of March 31, 2021, unless otherwise noted.
Performance (total returns)
| Benchmarks | March 2021 | YTD |
| Alerian MLP Index (AMZX) | 6.91% | 21.95% |
| Alerian Midstream Energy Select Index (AMEIX) | 7.08% | 20.72% |
| ICE BofAML U.S. High Yield Energy Index (HY Energy) | -0.01% | 3.88% |
| S&P 500 Energy Index (S&P Energy) | 2.79% | 30.85% |
Performance data quoted represents past performance and is no guarantee of future results. An investment cannot be made directly in an index.
Midstream takes the lead: After leading the U.S. equity market during the first two months of the year, the energy sector was more mixed in March as commodity prices cooled somewhat. S&P Energy climbed 2.79% in March and finished up more than 30% in Q1, compared to 4.38% and 6.17%, respectively, for the S&P 500 overall. During a month with relatively flat oil prices, midstream equities took over a leadership position in the energy sector. U.S. crude production recovered following the February winter storms, and crude rig counts continued their consistent upward climb. As such, the AMZX and AMEIX rose 6.91% and 7.08%, respectively, on an improving outlook for oil and gas production in North America. HY Energy was flat on the month, roughly matching the broader high yield index. Energy spreads fell to 461 bps, their tightest since mid-2018, offsetting rising Treasury yields. WTI crude prices declined by about $2.50 to $59.16/bbl as the demand outlook was challenged by a rising COVID-19 case count and slow vaccination rollout in Europe.1
Activity uptick beginning to show up in data: The impact on energy demand from the pandemic was swift, and the recovery has been somewhat uneven and sporadic. Prices have been supported by OPEC+ production cuts as global activity creeps back toward pre-pandemic levels. Vaccination progress has been predictably disparate across countries, with the U.K. and Israel leading, the U.S. gaining momentum, and Europe and many emerging markets lagging. In the U.S., which accounts for about 17% of global energy consumption, activity indicators are beginning to show promise.2 Air travel, which was one of the most impacted sectors of the economy, has begun to recover—daily airline passengers have doubled from around 700,000 per day at the start of the year to about 1.5 million at the end of March.3 Delta Air Lines acknowledged the surge in demand and was recently forced to cancel about 100 flights due to staffing shortages. Requests for driving directions via Apple Maps, which had declined earlier in the pandemic, have recovered to well above pre-COVID levels, a positive sign for gasoline demand.4 While there are still headwinds to global demand from the pandemic and many countries remain well below pre-COVID activity levels, we are beginning to see green shoots appear as the calendar turns to spring.
Key takeaways
- Energy finished off a stellar Q1 as midstream took the lead in March.
- High frequency activity indicators have turned upward in the U.S.
