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Energy Transfer, Cheniere stocks ride Wall Street volatility to higher ground

Energy Transfer LP and Cheniere Energy Inc. stock came out ahead during a particularly volatile few days for the U.S. stock market, but it did not signal a sectorwide rally for midstream oil and gas companies.

Between the end of trading Dec. 21 and Dec. 27, Energy Transfer units rose 4.9% and Cheniere units gained 2.6% while the S&P 500 gained 3%. It was a quick turnaround from the Christmas Eve trading session, when Energy Transfer and Cheniere's stock prices closed down 3.6% and 3.2%, respectively, while the S&P 500 dropped 2.7%.

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The Alerian Master Limited Partnership Index, which broadly tracks the midstream energy sector, declined nearly 0.5% during the past week, and share prices of pipeline heavyweights Williams Cos. Inc. and Plains All American Pipeline LP fell 1.5% and 4.6%, respectively, from the Dec. 21 close to Dec. 27. The Alerian has lost 20% since the beginning of 2018.

Midstream stock prices have struggled to keep up with the companies' financial outperformance as slipping oil prices and negative sentiment toward both the pipeline sector and the energy industry as a whole have deterred new investment, but analysts at energy investment bank Tudor Pickering Holt & Co. expect the recent volatility to be temporary.

"We're mindful of the old saying that the market can remain irrational longer than you can remain solvent, but ... this too shall pass," they wrote in a Dec. 28 note to clients.

The price of West Texas Intermediate crude oil has fallen 2.2% since market close Dec. 21 to settle at $44.61 per barrel Dec. 27. Since Oct. 3, when it reached a 2018 high of $76.41, the price has plummeted nearly 42%.