In this issue:

We are often a parochial country, notoriously lax about keeping up with events beyond our borders. You would think the highly globalized crude oil market would be an exception to that rule, and frequently you would be very wrong.

Case in point is this week’s plunge in crude oil prices, which as detailed below was sparked by a large build in crude inventories attributable mainly to a spike in imports and a decline in demand from refineries in maintenance.

Sellers of crude futures opted to ignore the much tighter inventories overseas, along with signs that brisk overseas demand is more than offsetting the very recent slowdown in U.S. gasoline consumption.

Nor did it help much that OPEC, led by Saudi Arabia, remains committed to limiting global supply despite the inevitable cheating on the export quotas by some members. In fact, if you were the Saudis and wished to dissuade U.S. shale producers from drilling you’d presumably make sure to discount your U.S. shipments by enough to keep stockpiles high. But this week the market didn’t care about that, or the fact that U.S. remains virtually the only significant source of near-term growth in production.

And it didn’t care for another parochial reason: the fact that financial traders had built up a record exposure to higher oil prices. With so many speculators leaning long we’re getting the inevitable volatile rebalancing.

The cash flow screen below identifies another opportunity to pick up the best shale oil producer at a markdown from its recent highs. If you don’t, you’ll very likely be kicking yourself at this time next year.

In other portfolio news, we’re certainly not kicking ourselves for recommending TerraForm Power (NASDAQ: TERP) when it was really down on its luck a year ago. In fact, TERP is a buy again following its deal to sell a controlling stake and sponsorship rights to investment giant Brookfield.

Portfolio Update

TerraForm Power (NASDAQ: TERP) upgraded to a buy below $13 in Aggressive Portfolio

Commodity Update

Crude oil prices suffered the biggest one-day drop in more than a year after bearish news on inventories (more on that below), while natural gas prices have bounced back close to the $3/MMBtu level.

In Other News

• A federal judge denied a motion by the Standing Rock Sioux to halt construction of the final piece of the Dakota Access Pipeline; oil is expected to flow through the line as early as next week

• Oil demand may not peak before 2050 according to the recently released BP (NYSE: BP) Energy Outlook

• Although the commodity analysts at Goldman Sachs expects oil prices to remain below $60/bbl for the foreseeable future, they do see demand outstripping supply in the secon d quarter of this year

• ConocoPhillips (NYSE: COP) CEO Ryan Lance urged President Trump to keep the U.S. in the landmark Paris climate treaty, arguing it will benefit oil and gas companies as power plants shift away from coal as a fuel source  

• Oilfield services provider Weatherford International (NYSE: WFT) named Mark McCollum, the former CFO of Halliburton (NYSE: HAL), as its new president and CEO.