In this issue:

For the long-suffering ethanol producers, this year’s bumper corn crop is a gift that will keep giving so long as corn prices stay depressed. But ethanol is not the only game in biofuels, and this week we investigate alternatives like biodiesel and hydrotreated vegetable oil.

We’re also doubling down on the last issue’s timely ethanol pick with the recommendation of another recently thriving producer.

All the recent excitement about the opportunities in alternative energy hasn’t distracted us from a global oil-services leader that remains a top pick after reporting another quarter of strong results. Few stocks offer the growth opportunities available to Schlumberger (NYSE: SLB), and even fewer can boast comparable profitability and operational excellence.

Picking out new winners in niche sectors can be hard. Sticking with this longtime outperformer has been an easy call that continues to deliver.   

Portfolio Action Summary

• Green Plains (NASDAQ: GPRE) added to the Aggressive Portfolio. Buy GPRE below $44

• Pacific Ethanol (NASDAQ: PEIX) buy limit increased from $18 to $21 in Aggressive Portfolio

 Commodity Update

Over the past two weeks the front-month contract for West Texas Intermediate (WTI) dipped briefly below $100 per barrel (bbl), but prices have bounced back since. The August WTI contract expired, closing at $104.59 which was the highest level for a front-month contract in three weeks. The September contract for WTI is presently trading at $102.39, while Brent is trading at $107.33. The Brent-WTI spread is now $4.94/bbl. Cooler summer temperatures continue to reduce the demand for natural gas from utilities. The front-month natural gas contract has fallen to $3.78 per million British thermal units (MMBtu), an eight-month low and a mere $0.07/MMBtu higher than a year ago. Natural gas in storage is replenishing faster than forecast due to the mild weather, but remains 25.5% below the five-year average for this time of year, and 22.2% below the level at this time last year.

In Other News

• Australian Prime Minister Tony Abbott, who made repealing Australia’s carbon tax a key part of his platform, saw that campaign promise fulfilled last week as parliament voted to repeal the two-year-old levy

• The bankrupt James River Coal (OTC: JRCCQ) is scheduled to auction itself off this week. The company has cited competition from cheap natural gas as a major factor in its bankruptcy

• Whiting Petroleum (NYSE: WLL) agreed to purchase Kodiak Oil & Gas (NYSE: KOG) for $3.8 billion in stock and assume Kodiak’s net debt of $2.2 billion to become the largest operator in the Bakken shale formation

• For the first time in decades, the oil industry was given federal approval to use air guns and sonic sensors to search for oil and gas offshore in Atlantic waters

• Natural gas prices continued to fall as mild summer conditions reduced demand and narrowed the historic deficit in natural gas inventories depleted over the winter