In this issue:
 
 In the Oct. 24 issue of The Energy Strategist, we upgraded the refiners Marathon Petroleum (NYSE: MPC), HollyFrontier (NYSE: HFC), Tesoro (NYSE: TSO), and Valero (NYSE: VLO) to Buys even as some brokerages were downgrading the sector. Since those upgrades, shares of these companies are up 20 percent (MPC), 4 percent (HFC), 18 percent (TSO), and 16 percent (VLO).

This week, some major brokerages joined the party. JP Morgan and Deutsche Bank both upgraded many names in the refining sector, citing a much improved 2014 outlook. If you read our reasoning for upgrading the sector in late October, the improved outlook cited by these brokerages is old news. However, the share price of most of these refiners is now above our recommended Buy target, so we would urge caution at this point. These is still upside for the refining sector, but the story isn’t quite as compelling as it was when we made the recommendations.

This is partly because crude prices have recently reversed their downward drift, threatening to chip away at the refining margins once again. In this issue we look at the underpinnings of crude’s resilience and add two new small-cap Aggressive Portfolio drilling plays with bigtime upside. Robert’s survey of Bakken midstream opportunities concludes with a survey of the basin’s gatherers and processors. They too can look forward to a busy year as North America tries to meet the rising global demand for liquid fuels. 

Portfolio Action Summary

• Adding Carrizo Oil & Gas (Nasdaq: CRZO) to the Aggressive Portfolio. Buy below $46.

• Adding Gastar Exploration (NYSE: GST) to the Aggressive Portfolio. Buy below $5.75.
   
  

Commodity Update

The price of West Texas Intermediate (WTI) showed surprising strength over the past two weeks, trading Tuesday at $98.68 (up $4.85/bbl from two weeks ago). The gains were triggered by larger-than-expected draws on US crude inventories. Brent crude dipped to $109.38/bbl, down $1.47/bbl. The front-month contract for natural gas traded Tuesday at $4.25/MMBtu, up 43 cents over the past two weeks and up more than 60 cents over the past month. The Brent-WTI spread dropped  to $10.70/bbl from the previous $17.02, but remains lucrative for domestic refiners.

In Other News

• The International Energy Agency estimated in its monthly oil market report that global oil demand will increase by 1.2 million barrels a day in 2014, aided by the US recovery

• JP Morgan and Deutsche Bank upgraded a number of refiners, citing an improving 2014 outlook

• Cheniere Energy has agreed to contracts worth a combined $9.5 billion with Bechtel for engineering, procurement and construction of LNG trains and facilities in Corpus Christi, Tex. Last week Cheniere announced a new deal to ship LNG to Indonesia. Cheniere shares are up 139 percent year-to-date.

• The Mexican Senate passed a market-friendly energy bill that would open up the world’s 10th-biggest oil producer to private investment

• BP (NYSE: BP) has won two recent favorable court decisions, one denying class action status to a group of BP investors, and one challenging questionable claims from the 2010 oil spill

• Barclays projected that energy companies will spend a record $723 billion looking for oil and gas in 201

• Falling US crude oil inventories pushed the price of West Texas Intermediate (WTI) sharply higher, reversing three months of weakening WTI prices