In this issue:

We don’t want to jinx ourselves by citing numbers you can check in the portfolios, but most of the new recommendations we’ve made this year are off to very nice starts. TerraForm Power (NASDAQ: TERP), Enviva Partners (NYSE: EVA), Consol Energy (NYSE: CNX) and Alliance Resource Partners (NASDAQ: ARLP) have made an early dud like SolarEdge Technologies (NASDAQ: SEDG) much easier to bear. Top buy Energy Transfer Equity (NYSE: ETE) has also been on a tear for months after its near-death experience last winter.

Here’s hoping for more of that from the two related crude pipeline picks profiled in this issue. Enbridge Energy Partners (NYSE: EEP) is offering a nearly 10% yield from the steadily growing volumes of southbound Canadian crude, while its Enbridge Equity Management (NYSE: EEQ) proxy automatically reinvests those distributions into additional equity and is suitable for tax-deferred retirement accounts. Both look like excellent values right now.

Taking a broader view, we look at the long-term threat to oil demand from electric vehicles, and find it overblown. Another automotive breakthrough seems much likelier to revolutionize travel, and its effect on fuel consumption is much less certain.

While some of our favorite recommendations are up a lot in recent months, they have a lot more to go before reaching their potential, and we’re raising our sights and buy limits as a result.

With  VelocityShares 3x Long Natural Gas ETN (NYSE: UGAZ), on the other hand, a crippling downdraft is a matter of when rather than of. With UGAZ up more than 30% since we recommended this short-term speculation two weeks ago, we suggest trimming your position in half to curb the downside while retaining some upside exposure for a little while longer.

CST Brands (NYSE: CST) is being acquired by a competitor in a deal very likely to close early next year, at a premium of some 30% to our entry price not quite two year ago. That’s a nice return from this chain of filling stations and convenience stores, which like its brethren has profited handsomely from low crude and wholesale fuel prices. The energy ecosystem is so large that even widespread pain results in gains for some. We hope to continue pointing you in the right directions.         

Energy Strategist Portfolio Update

• CST Brands (NYSE: CST) downgraded to Sell in Growth Portfolio
• Enbridge Energy Partners (NYSE: EEP) added to Conservative Portfolio below $30
• Enbridge Equity Management (NYSE: EEQ) added to Conservative Portfolio below $29
• Energy Transfer Equity (NYSE: ETE) buy limit increased to $22 in Growth Portfolio
• Enviva Partners (NYSE: EVA) buy limit increased to $29 in Aggressive Portfolio
• EQT GP Holdings (NYSE: EQGP) upgraded to a Buy below $30 in Aggressive Portfolio
• EQT Midstream Partners (NYSE: EQM) buy limit increased to $90 in Conservative Portfolio
• TerraForm Power (NASDAQ: TERP) buy limit increased to $15 in Aggressive Portfolio
• Sell half of VelocityShares 3x Long Natural Gas ETN (NYSE: UGAZ)

Commodity Update

Natural gas prices continue to show strength. Our recent short-term call to buy VelocityShares 3x Long Natural Gas ETN (NYSE: UGAZ) is now up about 30% in two weeks, which is why we’re now recommending a partial sale of this highly leveraged and speculative security. Oil prices continue to show resilience, refusing to retreat back below $40 per barrel as many predicted as excess global supply continues to diminish:

Propane prices are also showing strength well ahead of the winter high demand season, and ethanol margins are at their highest level in quite some time.

In Other News

• U.S. Secretary of Energy Ernest Moniz said something sure to displease many environmentalists when he acknowledged that hydraulic fracturing has actually helped limit carbon emissions

• Flooding in Louisiana has led to production cuts at two refineries, including ExxonMobil’s (NYSE: XOM) huge 502,500 barrel per day (bpd) plant in Baton Rouge

• Bloomberg highlighted the $100 billion threat faced by the oil industry in Louisiana as a result of chronic flooding eroding the Gulf coastline

• Exxon Mobil, Chevron (NYSE: CVX) and Hess (NYSE: HES) have agreed to bid together in Mexico’s first-ever auction of deepwater drilling rights in the Gulf of Mexico

• Oil prices showed strength in the last week but pulled back after Saudi Energy Minister Khalid al-Falih said he sees no need for significant oil market intervention.