In this issue:

Given the sheer volume of news nuggets, numbers, rumors and forecasts in the energy sector, it’s easy to get caught up in the minutia and miss the bigger picture. The annual compendium of the global energy statistics compiled by BP (NYSE: BP) is a good antidote to the short-term focus: it forces us to consider annual data points, thereby highlighting trends that can develop over decades.

One of the longer-term trends highlighted by this year’s edition is the seemingly inexorable growth in global energy demand, which actually accelerated last year as cheaper fuel stoked consumption in emerging markets.

The oil perma-bears’ case rests on these countries curbing their appetite for fossil fuels the way the developed world did over the last decade. But the financial incentives encouraging developing countries to stick with the cheapest energy sources are huge, and even in the developed world demand is responding to the low prices.

U.S. gasoline demand grew 2.7% last year according to the U.S. Energy Information Administration. If the agency proves right in expecting further growth of 1.8% this year U.S. gasoline consumption will hit an all-time high, surpassing the prior peak from 2007. The same trend is in play in the UK despite much higher fuel prices.

For the moment, these bullish demand developments continue to be offset by even bigger gains in global oil output. But U.S. output gains have already ground to a halt as a result of shale drilling cutbacks, and output disruptions around the world are on the rise. Nigeria’s production has been hit hard by rebel attacks on Western oil installations, while in Venezuela economic mismanagement and collapse are exacting an increasingly heavy toll. This is once again ratcheting up the world’s reliance on the usual suspects from the Mideast, who have much less spare capacity than they did a decade ago.

We remain bullish on crude prices over the medium term, even if it takes the market some time to digest the recent rebound from $28 to $50 per barrel. The global cost curve suggests higher oil prices in the years ahead.

We’ll be following this issue’s analysis of the annual oil stats with breakdowns of the other key energy sectors.

In the meantime, we’re taking advantage of the ongoing coal slump to recommend two heavily discounted mining plays. These partnerships have already taken the harsh medicine that should leave them among the biggest beneficiaries of the coming recovery, yet still provide attractive and fully covered yields.            

Portfolio Update

• Alliance Holdings (NASDAQ: AHGP) added to Aggressive Portfolio; buy below $23

• Alliance Resource Partners (NASDAQ: ARLP) added to Aggressive Portfolio; buy below $18.

Commodity Update

In Other News

• Despite continued pain for some OPEC producers, the exporters’ group once more declined to curb oil output at its recent meeting in Vienna

• A new report from McKinsey projected oil demand to peak at 100 million bpd by 2030, up from the current 94 million bpd

• Natural gas prices surged to a nine-month high as supply gains fell short of expectations

• Profit margins for refiners have dropped to the lowest levels since 2010

• Wildfires in Canada are again limiting oil production, as Cenovus and Canadian Natural Resources were forced to shut down their Pelican Lake facilities.