• OPEC+ production increases directly benefit midstream companies through higher oil volumes.
• Midstream operators earn stable, fee-based revenue, avoiding direct oil price risk.
• Higher throughput translates to strong cash flows, supporting consistent dividend payouts.
• Infrastructure constraints give existing pipeline and storage owners a key competitive edge.

The Unfashionable Case for Oil's Toll Collectors

Every time the OPEC+ cartel gathers, the market holds its breath. Traders glue themselves to screens, speculators place their bets, and the news cycle churns with predictions of soaring or crashing oil prices. It’s all very dramatic. To me, however, focusing on the price of a barrel of oil is a bit like watching the horses without owning the racetrack. The real, and dare I say, more sensible opportunity might lie with the companies that own the track itself.

I’m talking about the midstream energy sector. It’s the unglamorous, nuts and bolts part of the oil and gas industry. These are the companies that own the pipelines, the storage tanks, and the terminals. They are, in essence, the toll collectors on the world’s energy superhighway. And when OPEC+ decides to open the taps and increase production, who do you think benefits from the increased traffic?

The Boring, Beautiful Business of Pipelines

Let’s be honest, pipelines don’t make for exciting dinner party conversation. But their business model is wonderfully simple. Unlike oil producers, whose fortunes rise and fall with the volatile price of crude, midstream operators typically get paid for the volume they transport. More oil flowing through their pipes means more fees collected. It’s a straightforward, fee-based model that can offer a degree of predictability in a notoriously unpredictable industry.

Think of it this way. You could bet on which car will win a race, or you could own the toll booth on the only road to the finish line. I know which I’d find more relaxing. As global demand recovers and production slowly ramps up, these infrastructure owners are positioned to see a steady increase in business. Their revenue is tied to the physical movement of energy, not the speculative whims of the commodities market. This creates a potential for steady cash flows, which is music to an investor’s ears.

A Steady Drip, Not a Gusher

What makes the current situation particularly interesting is that OPEC+ isn’t just flooding the market. They are being quite methodical, gradually increasing output to meet demand without causing a price collapse. This measured approach is ideal for midstream companies. It creates a sustained "volume tailwind," allowing them to manage capacity and potentially generate consistent revenue growth over time.

This predictability often translates into one of my favourite things, dividends. Many of these companies are structured to pass on a significant portion of their cash flow to shareholders. As more oil and gas moves through their existing infrastructure, the incremental cost is often low, meaning more cash could potentially be available for distributions. It’s a simple equation, higher volumes can support stronger and more reliable dividends, assuming the business is managed well. Of course, dividends are never guaranteed, but the business model is certainly conducive to them.

Not All Pipes Are Created Equal

Now, it’s not as simple as just picking any company with a pipeline. The landscape is varied. You have operators like Western Midstream Partners, which is heavily involved in key US production basins. Then there are specialists like Hess Midstream, focused on prolific regions such as the Bakken shale. And you have giants like Williams Companies, which operates a vast network primarily for natural gas but benefits from the broader energy ecosystem. Understanding these nuances is key. If you're looking to explore this landscape, a collection of these firms, like the OPEC+ Opens The Taps: Midstream's Moment basket, can offer a starting point for research.

Of course, no investment is without risk. The global push toward renewable energy is a long term headwind, and evolving environmental regulations could add costs. Furthermore, these dividend paying stocks can be sensitive to interest rate changes. If rates rise significantly, their yields might look less attractive compared to safer government bonds. It’s crucial to go in with your eyes open, acknowledging that even toll roads can face disruptions. Still, for the foreseeable future, the world is going to need oil, and someone will have to be paid to move it.

Deep Dive

Market & Opportunity

• The International Energy Agency projects continued oil demand growth through the 2030s, driven by petrochemicals and transportation fuel in emerging markets.
• Midstream companies utilize a fee-based business model, generating revenue from the volume of oil transported rather than volatile commodity prices.
• Gradual production increases by OPEC+ create a "volume tailwind," leading to sustained growth in throughput for infrastructure operators.
• High utilization rates for existing pipelines give operators pricing power, as building new infrastructure is a multi-year, capital-intensive process.

Key Companies

• Western Midstream Partners LP (WES): Operates critical pipeline infrastructure across key US production basins, with a fee-based model that generates cash flows directly tied to production volumes.
• Hess Midstream LP (HESM): Owns and operates midstream infrastructure, including gathering, processing, and transportation services, in the productive Bakken formation.
• Williams Companies, Inc. (WMB): Operates one of the largest natural gas pipeline networks in North America, with integrated infrastructure that benefits from increased energy production across hydrocarbons.

Primary Risk Factors

• Evolving environmental regulations could potentially affect long-term demand for oil transportation networks.
• The global transition toward renewable energy creates uncertainty about the long-term viability of the sector.
• Sustained low oil prices can reduce drilling activity, which could eventually impact pipeline utilization volumes.
• Economic downturns may decrease overall energy demand and affect throughput.
• As high-dividend companies, they are sensitive to rising interest rates, which can make their yields less attractive relative to fixed-income alternatives.

Growth Catalysts

• Predictable cash flows from fee-based contracts support consistent dividend distributions to shareholders.
• Regulatory hurdles and the high cost of new projects create significant barriers to entry, protecting existing operators from new competition.
• A renewed geopolitical focus on energy security and reliable supply chains benefits North American midstream operators.
• As volumes increase through existing infrastructure, much of the additional revenue can flow directly to cash flow, potentially supporting dividend growth.

Investment Access

• The "OPEC+ Opens The Taps: Midstream's Moment" basket of stocks is available on the Nemo platform.
• Nemo is an ADGM-regulated platform that offers commission-free investing.
• The platform provides access to fractional shares, allowing investment to start from $1.
• Nemo offers AI-driven research and analysis tools to help users evaluate investment opportunities.