I'm interested in understanding how the daily fluctuations in the price of natural gas, WTI, Brent and any other relevant commodities, as well as the general stock market and interest rates affect the daily share price fluctuations of KMP.
Obviously the price is determined by the number of buyers and sellers. but what outside factors contribute to buyers and sellers interest? I'm not talking about indexes like AMLP.
Is KMP boosted when WTI is up because they are a producer? Is it boosted when WTI is down because it increases demand for their distribution side? Which factor is more dominant? The same questions for natural gas and other KMP products.
Clearly rising interest rates hurt as does a falling stock market (in a muted way).
Why do KMR and KMP often trade in the opposite direction of KMI?
KMP trades to yield between 350 and 450 basis points over ten-year Treasury yields. Let's take the mid-point of 400 basis points. Ten-year closed at 2.60% today on Google Finance implying a 2.60 + 4.00 = 6.60% yield for KMP. Google has it at 6.70% today.
Ten-year almost breached 3% this year which would imply a 7% KMP yield. ($1.35*4) / 0.07% = $77.14.
4% on Ten-year Treasury next year? Increase the distribution and do the math.
KMP/KMR/KMI and the stock market in general are correlated with crude oil prices. Crude prices up are a proxy for increasing economic growth, crude oil prices down for slowing growth. Other things come into play. The correlation between crude and the stock market is about 50%. I have the data to do the calculations on KMP but I'm dragging my feet.
This is from the most recent PR on EPS... as you can see fluctuation in the price of oil has very little impact on KNPs bottom line.... its funny how shorts keep showing up on MLP bds like KMP & EPD and try to scare unitholders because of the drop in the price of oil and gasoline.
" In its CO2 segment, the company hedges the majority of its oil production, but does have exposure to unhedged volumes, a significant portion of which are natural gas liquids. For 2013, the company expects that every $1 change in the average WTI crude oil price per barrel will impact the CO2 segment by approximately $6 million, or approximately 0.1 percent of KMP’s combined business segments’ anticipated segment earnings before DD&A."
You have to remember that oil price is a double edged sword depending on the price of oil used in the budget... if oil trades above the projected price as it has been then you see a gain.... below then its that 1/10 of a % per buck
The PR will also tell you that the assumed budget price of oil was $91.68 for Q3.... the actual avg in the Q was $105.83... a positive for unitholder of more than $14
The EPS PR was long... but if you own these units I can't see how every word is not important
"I'm interested in understanding how the daily fluctuations in the price of natural gas, WTI, Brent and any other relevant commodities, as well as the general stock market and interest rates affect the daily share price fluctuations of KMP."
Daily fluctuations? Forget it. There is no correlation.
Kinder Morgan's actual oil and gas production is limited so their income and earnings don't vary much based directly on benchmark prices such as WTI. They get paid by the volume on the pipelines, so they are more sensitive to long term demand fluctuations, particularly for natural gas and refined products. The transport prices are usually relative fixed by contract and tariff so income is stable compared to producers (i.e. Chesapeke). That is my take anyway.