In this issue:
 
 The price of crude is not challenging two-year highs on idle fears; it’s responding to disruptions in Libya and Iran that have reduced spare global capacity. We review a new report quantifying the recent production outages.

As the price of crude outpaces that of natural gas, the advantages of compressed natural gas as vehicle fuel become more obvious. In this issue we recommend a company already profiting from this trend with big upside as CNG use continues to expand in the developing world.

In contrast, advanced biofuels have proven to be a dead end for investors and governments, as some of us predicted long ago.

We also anticipated the recent weakness in refining margins, and this trend probably has more to go. Keep hold the refining stocks only if you’re truly a long-term investor.  

Portfolio Action Summary

• Adding Fuel Systems Solutions (Nasdaq: FSYS) to the Aggressive Portfolio; buy below $23

Commodity Update

Fears that the US may become entangled in Syria eased over the past two weeks, and crude oil prices pulled back from recent highs as a result. Since the previous issue of The Energy Strategist, Brent crude for October delivery has declined to $111.45 a barrel, a drop of $5.74/bbl over two weeks. West Texas Intermediate (WTI) dropped to $107.34/bbl, a drop of $4.87/bbl. The continued depressed Brent-WTI differential (currently $4.11/bbl versus $17.32 a year ago) will weigh on many refiners’ profits this quarter. More on that below. Finally, front month contract for natural gas is trading at $3.60/MMBtu, a penny higher than two weeks ago.

In Other News

• Following failed attempts by three oil majors, Poland has finally become the first in Europe to produce shale gas from hydraulic fracturing  

• A report from IHS CERA estimates that the fracking boom in the US has increased average annual household income by $1,200

• Venezuela suffered a massive power outage that left 70 percent of the country without power

• The Senate Foreign Relations Committee voted to authorize President Obama to use force against Syria in response to the country’s use of chemical weapons

• A World Bank arbitration panel has ruled that Venezuela failed to properly compensate ConocoPhillips (NYSE: COP) for seizure of the company’s assets in 2007

• Refiners broadly declined after Simmons downgraded the sector to Neutral because of concerns about refining margins in Q3 and into 2014