BX Expects Profitable Energy Trade

The energy chief of The Blackstone Group LP (BX - Analyst Report) stated that the company is anticipating huge profits from long-term private equity investments in energy sector in spite of the current market volatility. This has been reported by Reuters.

According to Blackstone, the fast-growing markets of Southeast Asia and Latin America, along with the power-starved regions of the Middle East and Africa, are currently consuming a large proportion of global output of energy and will drive future demand with population growth. This makes long-term investment in energy a very fruitful idea.

This analysis comes in the wake of investors shying away from energy stocks because of dwindling oil demand and overall sluggish economic growth in the U.S. Although record improvement in the production of natural gas in the past year has left inventories brimming and pushed the prices to record lows, it has not been able to positively influence investors’ confidence in the sector.

The volatility seen in the market is mainly due to the ongoing developments in troubled nations of Iran and Greece. This has kept the world away from investing in energy stocks. Moreover, the U.S. has threatened to block Iran’s economic ties with other nations if the country does not abort its nuclear program. This is also a huge matter of concern for the investors.

Further, the investors’ sentiments are badly affected by the financial crisis in Greece and the uncertainty in global markets.

Blackstone recently invested $2 million in Cheniere Energy Partners LP (CQP) which owns and operates the Sabine Pass LNG receiving terminal in Louisiana for construction of gas-liquefaction plant for export markets. This step was in line with the company’s optimistic views regarding energy sector.

Conclusion

We believe that Blackstone’s ideas regarding the future of energy sector is quite apt. As pointed out, demand for energy is ever-increasing, and that is why the investors must continue to invest in this sector.

Moreover, a Thomson Reuters report revealed that private equity investments in energy sector have outpaced the performance of the general American stock exchanges. With consistent returns from investments in energy sector, we expect Blackstone to gain in the long-term.

Currently, Blackstone retains a Zacks #3 Rank, which translates into a short-term Hold rating.