In this issue:

 The US government’s energy crystal ball hasn’t always been on the money, but it’s hard to argue with  the Energy Information Administration’s conclusion that China and India will soon need much more energy than they now consume. We break down the EIA’s latest International Energy Outlook.

Solar energy is the fastest growing sliver of the energy market, and its rapid gains in economic feasibility relative to fossil fuels, along with concerns about climate change and pollution, are likely to spur much more growth. One solar company stands out in scale, technology and financial reliability, and we’re taking advantage of the recent drop in the share price to add it to the portfolio.

Top hedge fund managers certainly stocked up on shares of oil drillers, gas producers and refiners this spring, based on the latest filings. They bought many of the same names we’ve been recommending since the winter, and given high oil prices there’s every reason to believe energy stocks can continue to play catch up with the market rally for the balance of this year.  

Portfolio Action Summary

• Adding First Solar (Nasdaq: FSLR) to the Growth Portfolio; buy below $45

• Adjusting the buy below target on Cabot Oil & Gas (NYSE: COG) to $42.50 to account for the recent 2:1 stock split

Commodity Update

Even though the EIA recently forecast that Brent crude prices would contract over the rest of the year, Brent crude for October delivery has spiked up to a six-month high of $117.19 a barrel. West Texas Intermediate (WTI) has risen this week to $112.21/bbl, an 18-month high. Oil prices have risen primarily due to the threat of US strikes on Syria, continued unrest in Egypt and disruptions to an oil field in Libya. Although Syria is not a major oil producer, a Western attack could drag in Iran and Israel and threaten output in neighboring Iraq. Brent prices are more impacted by these events, which has caused the Brent-WTI differential to increase to $4.98/bbl from last week’s differential of $3.09/bbl. The front month contract for natural gas is trading at $3.59/MMBtu, versus $3.31/MMBtu a week ago.    

In Other News

• Mexico’s PEMEX announced it will seek to reverse slumping oil production by developing shale-gas and shale-oil fields in the US

• Wood Mackenzie projects that China will overtake the US as the world’s largest oil importer by 2017

• Fitch and Moody’s cut the  bond ratings of leading coal producer Peabody Energy (BTU), citing expectations for continued weakness in the thermal coal market

• The Energy Information Administration reports that renewable energy sources provided 14.2 percent of the nation’s net electric power generation during the first half of the year, up from 13.6 percent in the same period in 2012

• The Japanese government announced this week it will take over the Fukushima nuclear reactor cleanup effort from Tokyo Electric Power Company (OTC: TKECF) as radioactive water continues to leak into the ocean