In this issue:

When industry giants with the most money and some of the best intelligence decry a lack of bargains worth acquiring, there’s a chance they’re merely trying to talk down the price. But their willingness to wait out the recent rally is an important data point at a time when smaller and less focused investors are rushing to the rescue of some of the most leveraged shale drillers by buying their secondary equity offerings or newly issued debt. The world remains oversupplied with oil at the moment, and we argue this week that those shale share buyers are taking on a lot of short-term risk.

We’re happily laying off some of that risk this week by recommending that you take partial profits in two drilling stocks that have run a lot so far this year. Continental Resources (NYSE: CLR) is up 33% year-to-date after losing more than half its value over the last four months of 2014. Carrizo Oil & Gas (NASDAQ: CRZO) is up 27% year-to-date and now above its price on Oct. 1.

We continue to view CLR and CRZO as worthwhile investments and two of the most promising long-term growth stories out there. But their near-term risk/reward doesn’t look nearly as good as it did earlier this year.

The same can be said for Occidental Petroleum (NYSE: OXY) even though it’s down so far in 2015. That’s the one recommendation we’re jettisoning altogether.

We have higher hopes for Conservative Portfolio holding BP (NYSE: BP) amid reports that the company is preparing to resist potential merger advances. We think it’s only a matter of time before BP’s heavily discounted valuation and damaged brand lead to a sale.

Meanwhile, current fundamentals look much more promising for midstream oil and gas shippers with the right pipes in the right places. We review two strong reports filed this week and upgrade a recommendation that’s already doubled for us in less than two years.

• Occidental Petroleum (NYSE: OXY) sold from Growth Portfolio

• Carrizo Oil & Gas (NASDAQ: CRZO) sold half in Aggressive Portfolio

• Continental Resources (NYSE: CLR) sold half in Growth Portfolio

• EQT Midstream (NYSE: EQM) upgraded to Buy below $100 in Conservative Portfolio

Commodity Update

West Texas Intermediate (WTI) made a strong move up over the past two weeks. WTI is currently at $57.15/bbl, up $6.41/bbl since our previous issue. The price of WTI has now climbed more than 30% since mid-March. Brent crude surged $8.48/bbl over the past two weeks to $65.31/bbl. Our forecast for natural gas continues to prove accurate as prices are going nowhere in a hurry, trading down a penny to $2.53 per million British thermal units over the last two weeks.

In Other News

• The Energy Information Administration is forecasting that next month U.S. shale oil production will experience its first monthly decline in more than four years  

• Before its recent acquisition of BG Group, Shell took a long look at BP (NYSE: BP), Bloomberg reports. Executives at BP are now concerned that the company is vulnerable to an opportunistic bid

• In response to low oil prices, the number of people trading in their hybrid car for another has fallen below 50% for the first time

• Bullish positions on West Texas Intermediate (WTI) futures have reached their highest levels in eight months

• The Obama administration has proposed spending up to $3.5 billion to upgrade natural gas pipelines nationwide.