In this issue:

A portfolio of several score energy stocks can occupy a platoon of analysts at an investment fund or Wall Street research department, not that you would necessarily know it from results.

The two of us manage ours part-time, on top of our primary mission of supplying industry and market analysis.

In this we’re no different from you, assuming you too have limited time for portfolio management. Included here is the time to develop fundamental views and to select a portfolio that reflects them. One lesson we’ve extracted from the first half is how easy it is to skew one’s results with the inevitable oversight or mistimed trade.

Our hope is that you’ll find our experience as helpful as a first-half Best Buy list that delivered multiple runaway hits, along with a few more modest misses.

Based on our forecasts from the beginning of the year, we can’t claim to be surprised by higher oil prices, rallying energy stocks and the outperformance of the gas drillers and pipeline companies.

But we do still expect a curveball or two in the second half. This is no time for complacency.

Commodity Update

Concerns about inventory levels and the Brexit vote have caused oil to pull back from recent highs, but a return to the $30s seems unlikely. Should that happen, long-term investors should definitely view it as a buying opportunity. Likewise if natural gas pulls back to $2.50. Both commodities are historically cheap now, but at those prices both become no-brainers with their current long-term outlook. We don’t often mention the last two items on the table, but they speak to the current woes of refiners. The 3:2:1 crack spread, a good proxy for the profitability of the refining group, continues to weaken. Meanwhile, the profit proxy for ethanol producers, the ethanol crush spread, is improving. This is not only good for ethanol producers, but it is further bad news for refiners, who are legally mandated to purchase ethanol to blend into gasoline.

In Other News

• Oil production in the U.S. has fallen by 800,000 barrels per day over the past year, the biggest reason we’re seeing the easing of the oil glut

• Citibank forecasts that the oil market is ‘setting the stage for a bullish end to the decade,’ beginning in 2017

• John Holdren, director of White House Office of Science and Tech Policy, called the “keep it in the ground” movement “unrealistic,” adding that “the U.S. will be using fossil fuels for decades to come”

• Baker Hughes (NYSE: BHI) reported that U.S. drillers added oil rigs for a sixth week in the last seven

• Goldman Sachs believes the American oil industry will need to add 80,000 to 100,000 jobs between now and the end of 2018 to keep up with an expected uptick in drilling activity

• BP (NYSE: BP) has put a final price tag of $61.6 billion on what its Gulf of Mexico oil spill cost the company.