Midstream's Next Phase: Oil Focus Gives Way to Gas

Core Insights - The midstream energy sector is experiencing a fundamental shift from being primarily influenced by crude oil prices to focusing on natural gas demand growth and global electrification trends [1] - Oil prices are no longer the main determinant of profitability for midstream companies, which primarily operate on a fee-based model and have limited exposure to commodity prices [1] - The diversification of customer bases in energy infrastructure is notable, with significant growth in liquefied natural gas (LNG) export capacity and new customer segments emerging [1] Midstream Sector Performance - In 2025, while WTI crude prices fell nearly 20%, the Alerian MLP ETF (AMLP) and Alerian Energy Infrastructure ETF (ENFR) indexes increased by 8% and 7% respectively on a total-return basis [1] - From the end of 2022 to the end of 2025, WTI crude prices decreased by nearly 30%, while the underlying indexes for AMLP and ENFR rose by 70% and 77% respectively on a total-return basis [1] Natural Gas and Electrification - Natural gas currently accounts for approximately 42% of U.S. electricity generation, and the demand for reliable power generation is increasing due to the rise of AI data centers, electric vehicle fleets, and residential shifts towards heat pumps and induction stoves [1] - The "electrification of everything" is a long-term trend expected to provide significant support for natural gas demand over the next 25 years [1] Investment Considerations - Advisors often choose between AMLP and ENFR based on client objectives, with AMLP being a strong yield option and ENFR offering more exposure to natural gas infrastructure [1] - As of February 26, over 70% of ENFR's underlying index by weighting focuses on natural gas infrastructure, aligning it closely with the electrification narrative [1]