Many moving parts influence oil prices, including the outlook for US inflation, expectations for China’s economic growth and conditions in European credit markets. Accordingly, forecasting oil prices is an exercise in probability, not an exact science.

In the first issue of 2012, we called for oil to retest its 2011 high and average between $100 and $110 per barrel on the year. Our full-year outlook hasn’t changed.

Crude oil prices appear close to a bottom. Although a selloff in equities markets could lead to further downside for oil prices, Brent crude oil should find support at the mid- to high $80s per barrel and WTI should find support in the mid- to high $70s per barrel. We still expect Brent crude oil to eclipse $110 per barrel and WTI to recover to $100 per barrel by year-end.

Based on this outlook, we highlight a handful of value-priced Portfolio holdings that should take off when oil prices recover.

In This Issue

The Stories

1. Oil prices appear to have bottomed in recent weeks. We analyze the various factors that will drive oil prices in coming months and update our near-term price outlook. See Oil Outlook.

2. Here are three of our favorite bets on a recovery in oil prices. See Oil’s Value Menu.

3. If oil prices rally in the second half, unit prices of the trusts in our model portfolios could eclipse even our aggressive valuations. See Oil and Gas Trusts: Strategy Update and Valuation Refresh.

The Stocks

EOG Resources (NYSE: EOG)–Buy < 125 in Growth Portfolio
Oasis Petroleum Corp (NYSE: OAS)–Buy < 36 in Aggressive Portfolio
Occidental Petroleum Corp (NYSE: OXY)–Buy < 100 in Growth Portfolio
SandRidge Mississippian Trust I (NYSE: SDT)–Hold
SandRidge Mississippian Trust II (NYSE: SDR)–Buy < 23
SanRidge Permian Basin Trust (NYSE: PER)–Buy < 25
Chesapeake Granite Wash Trust (NYSE: CHKR)–Buy < 23