Oil prices continue to retreat due to ongoing weakness in the energy sector. Despite Goldman Sachs’ insistence that some must own stocks’ prices would breach $80 per barrel and possibly run to $100, the opposite has occurred. Hard to believe that this bank could be… so… wrong… Oh the humanity!
Concerns about Chinese demand have weighed down the commodity. The surge of the Delta variant has suppressed expectations ahead for the economy. And now, OPEC has said that it will not increase production in order to help the Biden Administration reduce gasoline prices.
The U.S. producers might increase output. But for now, the supply and demand imbalance has been thrown off. But a buying opportunity has emerged… and not in the place you think.
All Aboard the Midstream
There exists a lot of opportunity for the midstream part of the energy sector. But nothing may be more interesting right now the Cushing MLP & Infrastructure Closed End Fund (NYSE:SRV).
Remember, closed-end funds trade on the whims of investors on the open market. Rather than just buying master-limited partnerships like Energy Transfer (NYSE:ET) and Enterprise Product Partners (NYSE:EPD) and their lofty dividends, you can buy a fund of these partnerships.
And best of all – these funds trade at a significant discount to their net-asset value. The Cushing MLP fund trades at a 24.3% discount to its NAV and offers a 5.57% dividend. The fund owns some of the largest MLPs. So, if you want to buy into these great funds that are trading at a discount to their share prices.
Just take a look at this portfolio.
If you’re looking for an alternative way to play lower oil prices right now – and you’re expecting a rebound in crude – these must own oil stocks could be the best combination of risk and reward for the months ahead.