But the figures are beginning to tell us something very different – at least on one side of the pond.

The American Petroleum Institute (API) released data today that indicates "petroleum consumption" in the U.S. declined by 0.3% in April from levels one year ago. Meanwhile, gasoline demand actually grew for the third month in a row, although by only some 1%. It had been up 3% in March year-on-year.

Demand for distillates (diesel, low-sulfur content heating oil) also increased.

So where is the decline that everybody wants to talk about?

It turns out to be in jet fuel (high-end kerosene), which was down 3.2%.

Now, the analysts are quick to call the gasoline gain this month "tepid." And they point out that millions are still out of work with unemployment above 8%. What they fail to take into consideration is the overall upward trend in consumption, even with the employment and economic concerns.

The prevailing argument fails to consider that the demand level will accelerate once the economic recovery picks up. If the current environment remains weak, and there are still demand gains in the oil products most directly affecting overall price, what will happen when the recovery returns in earnest?

A "tepid" 1% rise per month is still 12% a year – and that would require considerably more domestic drilling.

That is due to a revolution of sorts in the production landscape.

Imports of crude oil this year are likely to continue declining; reversing what had been an increasing reliance on foreign oil to satisfy need in the American economy. In April, for example, 55.8% of crude used in the U.S. came from exports, down from 61.3% in April of last year.

And according to projections, less than 50% of our requirements will come from imports by as early as 2015, with only 30% needed within 15 years. Those imports would come almost exclusively from Canada.

To put this into perspective, only three years ago, we were expecting that 70% of American requirements would come from foreign countries.

The difference now is the rise in the domestic availability of unconventional oil – shale, tight, heavy, bitumen, oil sands – in volumes that have completely changed the production landscape.

Still, that alters neither the aggregate price (unconventional costs more to produce on average and certainly more to process) nor the demand projections.

Elsewhere, the demand picture is intensifying.

Not in Europe, of course, where a combination of Greek, Spanish, Italian, cross-border banking, German economic concerns, and a rising opposition to austerity measures have combined to depress demand (and spirits).

Neither the North American nor the European markets are determining global prices these days. The developing and industrializing nations are in the driver's seat now. Despite recurring concerns about Chinese or Indian economic expansion, and recent OPEC and International Energy Agency (IEA) revisions in global demand projections, we will still come in this year with a 1.8% gain and an 89-million-barrel -per-day average.

So, if this is the "big picture" (and it is hardly new), why have crude prices in the U.S. declined 15% since their most recent high at the beginning of March? If demand is in fact increasing, albeit slower than the TV talking heads would like, why are prices moving in the opposite direction?

There are two – very different – answers here.

1) Headlines are Telling Us the Wrong Story

First, perceptions of demand moving forward are prone to reading overemphasized deflation concerns into every headline.

• Greece is without a government (was it that different when they apparently had one?);
• Spanish banks are under renewed pressure;
• Germany faces concerns on the prospects for ongoing growth; and,
• France voted in a socialist president whose plane was hit by lightning almost immediately after (perhaps a divine comment on an election result?)
• And oh yes, a certain American investment bank lost a few billions riding derivatives in the wrong direction.

But none of this has anything really to do with demand projections in the U.S. or, for that matter, elsewhere in the world.

The European contagion is becoming an isolated situation, at least for now. The decline in the euro against the dollar is actually helping to improve the American export picture for finished products and even services.

As for the JPMorgan mess, it may breathe new life into government proposals for more oversight. Still, this has absolutely nothing to do with oil.

2) Short Sellers Setting Up for Big Gains

Second, and this is what has prompted a longer slide than would have happened otherwise, this has been an excellent opportunity for large short positions to profit from the declining oil price.

Now, there was a brief decline coming anyway, because oil had overheated.

However, given the defensive nature of the current market, the shorts can be ridden longer than usual, and a greater profit can be made than anything that's justified by the actual market specifics. That this also drives down the stock value of companies throughout the energy sector into "oversold" territory merely provides additional incentive to keep those shorts in place.

After all, even if the market would change abruptly, covering the shorts is still much cheaper than it was two weeks ago.

When the run has petered out, these same guys will be on the other end of the transactions pushing the prices up. That's just how this works.

So what's next?

We will continue to experience sluggishness in oil prices until the dust settles, and the profit incentive moves to the other side of the ledger. Then we will see hedging in a different direction, along with a rather quick rebound in prices.

In any case, this is a long-term market, subject to bouts of very short-term volatility.

Nothing happening in Europe or on the trading floor is going to change that.

Sincerely,

Kent

P.S. By the way, last Friday, Iraisedmy target price for oil – significantly.

But if you missed it, a major event is now just six weeks away that will have profound effects on the market. And oil at this target level is set to have significant effects worldwide – many of which the world is not prepared for. Yet the most significant effect of all – for you, anyway – will be the extraordinary amount of money this situation is likely to create.

Here are my new projections.

The aftermath of the Greek elections propelled the new radical left party SYRIZA into the limelight as the second strongest party in the country. Given the adamant refusal by SYRIZA leadership to accept bailout reforms, the party's new brokering position means the crisis will continue.

Bitter austerity measures await the formation of a coalition government, since no party received a majority of the seats in parliament from the vote. The coalition is supported by both the New Democracy and socialist PASOK parties, which have taken turns ruling Greece for nearly four decades.

But the surprise showing of SYRIZA has thrown the possibility of an accord into disarray.

At best, this means a further delay and likely a new election.

On the other hand, Greece has little time left. Any further delay in forming a government, with no guarantee that a very angry population will vote any differently the next time around, puts the next tranche of the European Union bailout package in jeopardy.

It is now more likely that Greece will leave (or be pushed out of) the Eurozone, casting a greater uncertainty on both the currency and the southern tier of countries still in the zone.

Spain is the current focus of concern, but Italy is also exhibiting renewed weakness.

Unlike Greece, Spain and Italy have debt problems that dwarf the ability of any Brussels-led support package. These economies are simply too large to be "rescued" from the outside.

The concerns over contagion, therefore, may actually expedite a Greek departure earlier than most thought possible.

Including me.

It is true that any members leaving the Eurozone will have a negative effect upon currency strength and economic prospects. It is also unclear how the Greek departure will aid in shoring up either Spain or Italy. The problems in each of these economies are endemic; they are not primarily a result of "spillovers" from the situation in Greece.

All of which means, to borrow a phrase from former U.S. Secretary of Defense Donald Rumsfeld, there are a series of "known unknowns" now facing the E.U. The credit and banking problems are essentially the "known" part of this equation. The extent of the fallout on the euro as a whole is the massive "unknown" flowing through the calculations.

This is accentuated by recent developments in the two major economies using the euro -Germany and France. No rescue package for any E.U. member is possible without the leadership of these two dominant European economies. To date, Paris has emphasized protecting its suspect banking sector, while Berlin has a strong political undercurrent demanding additional protection of German production and trade.

However, the recent French elections, in which a socialist has been elected president, and indications surfacing that the German economy may be facing a slowdown, will put continued support of a "bailout for austerity" approach to Greece in question.

Thus far, both major nations have led the E.U.-Greek approach, strongly arguing that the preservation of the euro demands it. The dramatic political events unfolding in Athens are rapidly undermining that support.

And this has impacted on the price of oil.

The only way oil prices are coming down is by the advance of pressures outside (exogenous to, as the analysts say) the oil market itself.

This is what happened in 2008. The rise in crude and the corresponding spike in the cost of oil products like gasoline, diesel, and heating oil retreated only when the full weight of the subprime mortgage-induced credit freeze hit.

Overall demand dried up as the ensuing recession hit.

We are seeing a similar short-term pullback in prices as concerns over falling demand levels parallel the European confusion.

Yet this time there are three important differences.

First, the American economy is largely insulating itself from what happens on the continent (assuming the JPMorgans of the world can oversee their traders).

Second, oil demand continues in those parts of the world that actually determine the pricing level. As I have said a number of times before, these are not North America, Western Europe or the developed (OECD) countries. This is based on developing and accelerating new economies elsewhere.

There is also a third factor of some importance.

The 2008 collapse and resulting worldwide recession centered on dollar-denominated assets, the assets basic to the global network of trade, cross-border capital flows, and wealth.

Not so this time around.

The current situation tends to benefit the value of the dollar against the euro. With virtually all international oil trades in dollars, that does mean prices may stabilize for a time. But it also means the concentrated asset wealth in those oil transactions will increase.

And despite the events in Europe, the ultimate value of oil contracts will increase as well – especially in a market where the essential rise in demand is occurring in those regions of the world not directly impacted by the euro zone problems.

So, farewell Greece, good luck, Spain.

Once the dust settles, oil holdings will continue to exhibit significant value gains moving forward.

Sincerely,

Kent

P.S. By the way, on Friday, I raised my target price for oil – significantly.

But if you missed it, a major event is now just six weeks away that will have profound effects on the market. And oil at this target level is set to have significant effects worldwide – many of which the world is not prepared for. Yet the most significant effect of all – for you, anyway – will be the extraordinary amount of money this situation is likely to create.

Here are my new projections.

West Texas Intermediate (WTI), traded on the NYMEX, shed 8.7% since May 1; meanwhile, the RBOB (Reformulated Blendstock for Oxygenate Blending) gasoline futures contract on the NYMEX has declined 6.1% since April 27.

WTI is down six of the last seven daily trading sessions, while RBOB is down six of the last 10.

In each case, we are back to price levels not seen since early February. Some of this results from concerns over Europe, while tunnel vision market watchers continue to point to lethargic demand on both sides of the Atlantic.

Well, enjoy it while it lasts, because this is the lull before the storm. And this storm will find geopolitical tensions, demand and supply constrictions all converging during the same period to shoot up prices.

It's no longer whether this takes place; the question is only when it will hit.

The harbinger of the market imbalance is unfolding weekly. Every Wednesday, the Energy Information Administration (EIA), a division of the U.S. Department of Energy, releases figures detailing what the oil picture looked like as of the previous Friday.

The recent trend has actually been up in inventories, seen by the talking heads on TV as an indication of stagnant demand. That demand level, in turn, is considered a barometer of everything from consumer sentiment, to industrial expansion, through employment prospects, investment levels, and productivity.

Traditionally, demand for oil products had been regarded largely as an effect of the economic climate. Lately, however, it is seen as the cause prompting the ups and downs in a whole range of market indicators.

Of course, it is never simply one or the other.

And in some cases, such as the period in which we now find ourselves, it really does not tell us very much at all. This is because it is not so much perceived levels of demand these days that trigger the pricing dynamics.

Remember, even if demand is considered the primary catalyst, it is not U.S. or European demand that determines market direction. This is a global market, and prices are more the result of developing nation needs and actions.

Yet, the EIA data are still telling us something very important. It is found in the relationship among three factors: refinery capacity; crude oil inventories; and gasoline and distillate (the category including diesel and low sulfur content heating oil) production.

The figures issued Wednesday (May 9) – showing us what the market looked like on Friday (May 4) – are a good case in point. The data were appreciably different from the estimates given by traders surveyed the day before. Such a result is hardly unusual. Over the past four years, surveyed pundits end up wrong at least 70% of the time when the EIA releases its figures a day later.

The interesting lesson is found in what the figures actually reveal.

Inventory Figures Sending Different Signals

Last week, U.S. crude oil refinery inputs averaged 14.7 million barrels per day, up marginally from the week earlier. Meanwhile, refineries operated at 86.4 percent of their operating capacity, with gasoline at 9.1 million barrels and distillates at 4.4 million barrels per day.

OK, so far it looks like refineries continue to keep back capacity while production is under control. Well, sort of.

Because the EIA also reports that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.7 million barrels from the previous week. At 379.5 million barrels, those oil inventories are above the upper limit of the average range (last three years) for this season of the year.

Yet, total motor gasoline inventories decreased by 2.6 million barrels last week and are in the middle of the average range. And finished gasoline inventories and blending components inventories decreased last week, along with distillate fuel inventories decreasing by 3.3 million barrels for the week, ending up in the lower limit of the average range.

The widening surplus of oil inventories in these weekly energy snapshots are not reflected in product. While crude rose 3.7 million barrels, the combined gasoline and distillate production was down almost six million barrels.

Added to this spread is the refinery utilization figure coming in well below the level of refining capacity. More oil stored along with less products refined results in shrinking inventory. Now that would seem to point to less demand, according to the traditional view.

Except something else had been stalking the figures over the past month.

As refineries balance rising unconventional oil production domestically with continued imports, so also do they need to balance the price of WTI and that of Brent set in London. Brent is more expensive, and it is also used as the benchmark to determine the daily export prices of more crude worldwide.

If the refineries anticipate that prices for raw material will be increasing, they will increase crude inventories up front, while cutting refinery runs. In short, they will stockpile crude and reduce operational capacity utilization to maximize the forward retail pricing potential.

A declining inventory of gasoline and distillates results, made more so by the exporting of oil product out of the U.S., a practice that has been increasing.

What if they get these calculations wrong and demand increases? In the short term, that excess demand is filled by importing gasoline and diesel.

The raw martial inventory speaks of expected crude price hikes coming. Meanwhile, the declining gasoline and distillate stockpiles telegraph that the refiners are restraining product from the market to increase profit margins at a later date. The practice is accentuated by excess spare processing capacity at the refineries.

All of this has less to do with demand and more with manipulating the supply of oil products available to emphasize higher profits down the road.

So, get ready.

Sincerely,

Kent

P.S. By the way, yesterday I raised my target price for oil – significantly.

You probably received an email from Alex about it earlier.

But if you missed it, a major event is now just seven weeks away that will have profound effects on the market. And oil at this target level is set to have significant effects worldwide – many of which the world is not prepared for. Yet the most significant effect of all – for you, anyway – will be the extraordinary amount of money this situation is likely to create.

Here are my new projections.

Over the weekend, Norway's Statoil ASA (NYSE:STO) signed a massive exploration deal with Russian behemoth Rosneft in a venture that may require more than $100 billion in investment over the next few decades.

Specifically, the company is aiming to help Rosneft develop untapped oil resources in the Arctic, as Moscow struggles to gain a competitive advantage given declining conventional oil and gas production in Eastern Siberia.

The deal highlights a number of key issues for both companies and for Moscow moving forward.

For Russia, some of its most mature conventional oil basins are declining in output rapidly, at a pace that could reach 8% a year within this decade. With production waning and concerns about long-term supplies accelerating, Russia has no choice but to venture into the north.

But they know that they cannot make this push alone.

Such a radical change in procurement is technologically sensitive… and very expensive. Moscow needs outside investment and the most advanced technology to push into the hostile, energy-rich environments of the vast Arctic and East Siberian basins.

At the same time, Statoil has been scrambling to find new ways to get more involved in this push north. In recent months, oil giants Exxon Mobil Corp. (NYSE: XOM) and Italy's Eni SpA (NYSE:E) had been very active in working with Moscow to develop in these oil-rich environments.

In the wake of Russia's slumping reserves and production in Siberia, the Kremlin has been looking for ways to incentivize producers to help Rosneft replace waning production. Tax breaks have been one way, but companies also want a little bit of insurance when they work with Moscow.

The major question, of course, is this: How can shareholders know that Moscow won't expropriate any major resource finds, should the exploration deal succeed?

The answer is "hostage taking."

Taking Hostages in the Arctic

A key feature of this Statoil deal is a strategy known as "hostage taking." And it says a lot about the future of energy production and the cooperation required between multinationals and political leaders.

Statoil and Exxon (in their respective deals) are convinced they can protect themselves against the risk of having any major reserve discoveries expropriated by Moscow.

Both deals allow Rosneft to buy stakes in Statoil and Exxon-led exploration projects in the Arctic and elsewhere in the world. By encouraging greater exploration project cooperation around the globe, the companies are better able to reassure their individual shareholders.

This requires a lot of trust.

The real risk here comes if Statoil-led projects fail to produce any significant resource discoveries, while the Rosneft-led projects lead to massive reservoir finds. In that case, the hostages have no value.

But even if Rosneft were able to "freeze" Statoil out of the Arctic find, there's one major problem. The Russian behemoth is in no position to actually produce the resources itself, given the lack of technological expertise and ongoing capital concerns.

So the Statoil-Rosneft agreement is yet another massive deal that we've seen develop in the Arctic with a sound economic and political risk strategy to boot.

Just last month, Exxon and Rosneft agreed to begin finalizing their initial $3.2 billion Arctic deal that would require about $200 billion for joint projects in the next decade alone, and the development of 10 ice-proof platforms for the Kara Sea that would cost about $15 billion each.

That deal was the latest in a string that included Royal Dutch Shell's icebreaker contracts with Finnish suppliers, and TNK-BP's joint ventures in the Yamal-Nenets region of Russia.

These deals point out the obvious. The Arctic is the last great frontier of energy production in the world.

The U.S. Energy Information Administration reports that as much as 22% of the world's undiscovered oil and up to 30% of its natural gas could be in the Arctic Circle alone.

But none of this exploration and production will be cheap, which can only mean one thing.

Higher prices.

Unconventional Sources Are Needed Moving Forward

Oil prices have retreated right now to 2012 lows, while retail investors panic.

Concerns about Greece, Spain, and Italy are wearing down investor confidence. Meanwhile, the Iranian embargo looms large for July 1. The Saudis have guaranteed to meet the supply these three countries will lose, but they aren't going to guarantee the price.

The world, whether in a recession or in high times, still runs on oil. And the bottom line is that cheap, conventional sources are declining rapidly, while the influx of unconventional projects continue to ramp up. We'll see greater interest in Arctic production and greater cooperation between multinationals and governments in the coming months and years.

Multinational corporations don't enter the most hostile environments engineers have ever seen because they enjoy the challenge. They are doing so for profits, and because they are quite aware that the cost of energy in the future and the ongoing political stakes around the world require development of these resources.

The costs will be much higher to produce, the technological complications will accelerate, and political tensions can create significant setbacks.

But, over time, the investment opportunities and profits will be greater than ever.

Sincerely,

James

The one-day decline is the steepest since WTI fell 5.1% ($5.12) on January 3.

The other major benchmark, London-set Brent, also was hit, but less significantly, falling 2.6% to open today at $113.16. It was the largest Brent decline since a 4.6% dive on December 14.

And the dip in both is likely to continue a few sessions more.

However, the Brent-WTI spread is now increasing again. As of the close on Friday, the spread as a percentage of the WTI price (the better way of looking at it) stood at 14.9%, the highest differential in more than two weeks.

Two important questions follow.

First, why did this happen? Second, what is that spread again telling us?

The answers will surprise you.

Roll Out the Usual Suspects

As prices fell, TV pundits immediately paraded the usual suspects. They cited disappointing U.S. job figures, renewed concerns over European debt in general, and the Spanish situation in particular, while so-called "analysts" clamored over a possible double-dip recession.

These concerns are not new, nor are they revelations.

Plus, the essential reasons why the price should be moving in the opposite direction – namely up – haven't gone anywhere. The constriction produced by supply/demand considerations remain, and the insufficient volume available to meet unexpected demand surges and the geopolitical environment – especially the impending European boycott of Iranian crude imports – remain in full force.

The overall market dynamics still point strongly to a rise in price.

Yet the overall movement of crude oil futures has remained peculiarly restrained. In fact, WTI has given back 6.1% in the past week, and some 2.7% for the month.

Here's what's really happening…

Preparing for the Next Price Rise

The real reason we have witnessed a retreat in crude pricing has little to do with the condition of the market or the actual demand for product. It is the result of a classic yo-yo short in anticipation of a major advance in the price.

In other words, some very large traders in oil futures contracts – the so-called "paper-barrel" speculators of future actual consignments of oil (or "wet barrels") – are manipulating a short-term cut in price after establishing a position that will profit with the price going down.

This amounts to a "put" clone resulting in an exaggerated decline in the crude pricing level, usually orchestrated on a five-day pricing spread introduced by a sequenced derivative move on the futures contract itself.

The trader profits when the price goes down by exercising the "put" to sell options on the futures contract at a higher strike price than that provided by the market by redeeming the derivative.

Of course, when that happens, the market price will increase. The trader then profits again by having derivatives on the increasing price already in place.

The price is manipulated just like a yo-yo moving up and down. Now the maneuver is only doable during periods of lower-than-average futures contract volume and a narrow period in which the price is not likely to spike because of outside developments (for example, natural disasters, a rapid escalation in hostilities, blockage of transit, collapse in production, and so on).

It becomes less useful when the market indicators themselves are decidedly moving up. The approach succeeds by wider market perceptions, not fact. It ends when the actual pricing dynamics take over. In between, a few traders make some bucks by manipulating the margins.

There will be little opportunity for this device to operate again as we move into the summer volatility.

The Iranian Embargo Looms

As for the second question, that widening Brent-WTI spread is signaling a renewed concern about the real market impact coming from the EU-Iranian embargo and the increasing inability of other producers to make up the difference over the long term.

Saudi Arabia has agreed to cover the initial shortfalls to the most highly vulnerable European importers – Greece, Spain, and Italy. But that additional volume will not guarantee price moving forward. And it will also result in both price increases and market dislocations in other regions relying on Saudi exports – Asia especially and, in particular, India.

Spain attempted to secure additional oil from Nigeria but was told the African producer could not cover additional needs resulting from the embargo. Russia may benefit in the near term, but that will certainly increase prices paid by Europe.

All of this is reflected first in Brent because it is the benchmark most impacted by these developments. However, it will be translated into rising WTI prices as well, since the price in the U.S. is still reflective of the price in Europe due to imports.

The increasing spread, therefore, tells what is really going to happen.
Crude is going up.

Despite what a few very large short artists will pull off now and then in the hazy funny paper world of exotic derivatives.

Sincerely,

Kent

Editor's Note: Kent uncovered this WTI-Brent story months ago, and with the summer fast approaching, now is the time to get set up to profit… before we see oil prices spike through the roof.
To learn more, go here now.

And I knew immediately what I wanted to write about.

See, right now, state policy leaders around the country are coming to realize the long-term importance of natural gas exports to the health of their economies.

They're struggling to pass their 2013 budgets this year.

The recent 10-year low in natural gas prices and massive glut of supply are doing more than just hamstringing production around the country. It's also slashing government budget forecasts due to the loss of tax revenue associated with natural gas sales.

So much so, that states are predicting steep decreases in revenues through 2014.

USA Today reported this week that "energy-producing states are bracing for lower tax revenue from the plummeting price of natural gas, which is just above half of what some states forecast when they put together budgets for 2013 and beyond."

Low natural gas prices could cost Wyoming $125 million next year, and that the state will likely have to enact budget cuts of 8% for the year 2014 if prices don't recover by then. In Oklahoma, just a $1 drop in the gas price leads to a roughly $70 million shortfall for the state each year.

It's a staggering figure.

But Oklahoma Treasurer Ken Miller states that the "free market" will work itself out over the long term and natural gas prices will rise, particularly as large-scale coal-fired power plants convert to natural gas use.

More on that in a second.

As we've said before, the price rebound is inevitable. But we have to look at how we got here and where we're going to profit from these state shortfalls.

First, the major technological breakthroughs in fracking and horizontal drilling have significantly increased the amount of unconventional resources available around the country. So much natural gas has been produced, combined with an unseasonably warm winter, that natural gas prices have slumped significantly.

This has naturally affected producers in the short-term, although midstream storage and pipeline companies remain healthy due to their contract structures as value chain suppliers.

But low natural gas prices won't last forever. Over time, we're going to see prices begin to rise for four reasons.

Natural Gas Prices: States Fight Against Time

The first, as Miller mentioned, are power plant conversions. As for the other three, I covered them in February. At the time I wrote:

"By 2020, more than 90 gigawatts (GW) of electricity generation will come offline. Most of this power reduction will come from the retiring of coal-fired power plants.

"Our current estimates show that new natural gas plants would account for 1.2 billion cubic feet (BCF) per day of additional natural gas usage.

"The second and third demand factors also come from companies using natural gas as a replacement for conventional fuels.

"At the moment, greater usage is being made (and even more so in the future) of natural gas as feeder stock for the production of petrochemicals rather than crude oil. Yet as the price of crude oil rises, and regulations target carbon emissions, companies will look to natural gas a lower-cost alternative.

"Finally, international demand for natural gas will be a game changer for the U.S. markets.

"Like the United States, foreign countries are transitioning their economies away from coal-fired and nuclear power plants. An energy-starved world is hungry for cleaner, safer, and cheaper sources of power. U.S. companies are fully prepared to begin transporting LNG to foreign customers, especially as domestic prices hit rock bottom."

This stage began to boom last year with Cheniere Energy Inc.'s (AMEX: LNG) announcement of the Sabine Pass terminal, which was just cleared for construction by the FERC last week.

As greater quantities of natural gas are transported out of the U.S., we'll witness a shift in the demand curve, as new customers in energy-starved countries (England), countries where fracking has been banned (France), and countries with exploding populations (India) begin to import LNG.

That will have a strong impact on prices and production margins for producers and drillers.

Given these four major trends and current market conditions,late 2014/early 2015 appears to be the time when the LNG markets will be in full swing.

By then, states across the country will be happy to see that additional revenue back on their books. But, unfortunately for them, they can't capitalize on production the way that investors can, with natural gas prices near record lows and poised to break out.

The long-term situation is very promising, and the obvious reason why Cheniere Energy (AMEX: LNG) remains one of the core holdings in the Energy Advantage
portfolio.

What's got everyone so heated?

It seems a lot of people are concerned, confused, and even outraged over a recent Executive Order signed by President Obama regarding the development of unconventional natural gas formations here in the United States. The executive order, issued on April 13, calls for greater coordination in federal oversight of "fracking" – a revolutionary, yet-still-nascent process of extracting natural gas from rock bed.

Questions ranged from the impacts of new regulatory standards to industry support levels. Concerns stretched from sector performance outlooks all the way to the highly alarming and somewhat foolish argument that such an order precipitates a "government takeover of the natural gas industry."

Now, I'm overly cautious when the government announces any role in business. But when you take a close look, this announcement is rather benign.

That's why I'd like to take a few minutes today to explore the ongoing developments in this story, set a few eager minds at ease, and explain a few benefits – yes, benefits – of this Presidential directive.

In the age of 24-hour media, one marked by rampant polarization and limited policy analysis, we often hear only a fraction of the full story.

And yes, it's easy to get caught up in the immediacy or negative impacts of one single act.

But there's a lot to like here.

This Natural Gas Boom Came Along Very, Very Fast

The real story starts with the remarkable transformation of the natural gas sector here in the United States over the last five years.

The technological breakthroughs in fracking and horizontal drilling have revolutionized a national market and created an immense glut of supply across the United States. Hydraulic fracturing enables drillers to use high-pressure water, sand, and chemicals to break open seams in shale rock. This makes it easier to extract natural gas.

But this transformation has occurred so quickly that Federal agencies have been scrambling to keep up with the breakthrough. Nearly a dozen agencies have skin in the game when it comes to regulating and conforming to major Acts of Congress (including the Department of Defense, the Department of Agriculture, the Department of Transportation, the EPA, and so on).

Every agency conducts studies, examines process performance, evaluates legalities, and all of their work does take time (sometimes too much).

But when they are individually scrambling to set standards in conformity with major legislative acts, it can be very difficult for energy producers to meet expected regulations all at once.

Hence, this executive order.

The ultimate goal is to improve process and communication, something that has been sorely lacking in energy policy for the better part of 40 years. Improved communication between the agencies would enable greater understanding of one another's work, provide greater coordination between agency heads on this critical policy issue, and, specifically, reduce overlapping regulations.

But don't just take my word for it.

The Natural Gas Industry Supports This Order

The term "executive order" does have a negative connotation to it, since it sounds like an imperial command from high above. But in reality, this is similar to a corporate CEO telling the presidents and executives in various company divisions to meet now and then to discuss major company business.

And natural gas production is major business in the United States.

Nowhere in the order does it mention that the government will be involved in the actual production. In fact, it specifically states, "natural gas production is carried out by private firms."

But Federal agencies are at the service of the Executive Branch. Therefore, this order is directed at the agency leaders and their communications teams. These divisions are very siloed and conduct many similar projects, studies, and analyses. The goal is to expedite and facilitate greater coordination.

Still, if anyone is overly concerned about this being a situation where the government is expanding its regulatory overreach, there's industry support here.

The American Petroleum Institute (API) came out and supported this order just after it was released.

API is the largest trade association for the oil and gas industry in the country; it represents roughly 400 companies within the entire energy sector.

"We're pleased that the White House recognizes the need to coordinate the efforts of the 10 federal agencies that are reviewing, studying or proposing new regulations on natural gas development and hydraulic fracturing," said Jack Gerard, API president and CEO, in a statement. "We have called on the White House to rein in these uncoordinated activities to avoid unnecessary and overlapping federal regulatory efforts and are pleased to see forward progress."

Gerard has been outspoken and critical of the President, the EPA, the DOE, and just about every industry regulator there is in the past… and more than once, at least. So to see his support here is a positive sign for owners and operators in the unconventional business.

(On a personal note, I did some work with API in the wake of the BP oil spill. Recognizing their pro-business, "free-market" philosophy to the industry, I'd say that if Jack Gerard is "praising" this order, it's likely a good sign.)

Which brings us to the other concern…

Will There Be New Standards and Regulations?

As to the overall environmental impact of hydraulic fracking and horizontal drilling, the jury is out – and will be out for some time.

It's vital to give it some time while industry experts, agencies, and independent sources conduct analysis on the economic, environmental, and societal benefits and drawbacks of these processes.

But while concerns about overregulation in this sector were brewing up after this announcement, a new story unfolded yesterday that adds credibility to the companies involved to this ongoing drama.

Nearly a dozen major energy companies, including Chevron Corp. (NYSE:CVX) and Royal Dutch Shell (NYSE:RDS-A), announced they had developed standards for hydraulic fracturing in the Utica shale formation.

These voluntary "best practices" are designed for drilling, well design, water use, and equipment use. So, the industry is being proactive in setting standards to coincide with recent announcements from several additional agencies.

Hopefully, their actions will send a clear signal that they take the balance between energy development and environmental stewardship seriously.

More to this Story is on the Way

Kent said nearly 18 months ago that shale gas is too large a target for the operators to avoid. With so much money to be made over the long term, greater coordination between the agencies and greater adoption of best practices were inevitable.

This has been just the latest part of an ongoing drama that will continue to unfold and provide many profitable opportunities in the future.

Patience, unfortunately, is the commodity we really need when dealing with government and private sector coordination.

But the opportunities will come, and this revolution in unconventional natural gas couldn't come at a better time.

As Kent and I have explained at great length, the price of natural gaswillrise again. It's inevitable. And there is plenty of fundamental evidence in other commodity markets as to why. It might not be tomorrow, but it's coming. The problem is that some seem so overly focused on the near-term asset performance that they fail to recognize real long-term potential.

Kent's identified four big factors moving forward that will push the price back up, including the massive transfer to natural gas as a major replacement to nuclear and coal-fired power plants.

So don't let misinformation about policy and short-termism scare you away from the massive potential on the horizon.

I'm certainly wary of government's role in economic development, but from a process standpoint, it's important to improve communications between federal agencies. In fact, it could be a starting point to something much bigger.

I'll continue to cover this story moving forward, particularly as we approach the greater opportunities of midstream transportation and LNG exporting.

Best,

James

But, as you read this, I am already on another plane.

This one is heading for Houston and my meeting with officials from Nigeria.

As I've noted in the past, one of the many hats I wear in the oil world is a contributing editor for Thomson Reuters' Russian Petroleum Investor and Caspian Investor. These monthly energy publications go out to public and private sector decision makers worldwide.

Some of my policy-related market intelligence for immediate consumption can be found there, especially on developments with Iran, Iraq, and the Persian Gulf.

Today I want to share with you an abbreviated version of what I released over the weekend in Caspian Investor.

What I talk about is going to have a decisive impact on the increasingly volatile oil market we will experience moving into the summer. The analysis also provides a glimpse into one of my "other lives."

And it can help you make sense of the best way to profit moving forward.

Sincerely,

Kent

Iranian Talks Will Accomplish Little; Foreign Companies Experience Widening Problems

The upbeat statements coming from the conclusion of the Istanbul meeting between Western powers and Iran are unlikely to translate into any tangible success when the parties reconvene on May 23 in Baghdad.

Both sides have mandatory demands unacceptable to the other. Meanwhile, foreign companies still operating in Iran are feeling the rising bite of the sanctions.

False Optimism

Tehran is playing the high ground, at least for now. A series of upbeat statements coming from Iranian officials has placed a "positive" tag on the recently concluded first round of negotiations in Istanbul between Iran and the 5+1 group (the five permanent U.N. Security Council members – China, France, Russian, the UK, and the U.S. – plus Germany).

Alaeddin Boroujerdi, the head of National Security Council and Foreign Policy Commission of the Iranian Parliament, for example, announced on April 20 that Iran would negotiate with the major powers on the matter of cancelling the embargoes imposed on the country's banking system and oil trade.

The second round is now scheduled for May 23 in Baghdad. But while both Tehran and the world powers provided encouraging indications that the talks were progressing, the discussions are still likely to bog down once they reach the key demands on both sides.

According to Boroujerdi, the first round of talks has been "good and a step forward." Yet he expects the matter of eliminating the sanctions on Iran will be discussed during the second round of negotiations, which Tehran still anticipates will take place prior to the initiation of the European Union (EU) oil embargo on July 1.

"I suppose that the talks took place at all should be considered a plus," a U.S. policy contact told me on April 22. "Yet, the substantive separation remains wider than the Strait of Hormuz," a reference to the strategic Persian Gulf oil choke point now the focus of considerable geopolitical concern.

The Impasse

Iran is demanding the end to sanctions against both its international banking and global oil trade before it will even entertain discussions on its domestic nuclear program. Tehran continues to claim the program is only for peaceful energy purposes, while the West has concluded the enrichment levels being pursued are well in advance of power generation purposes and can only be needed for weapons development.

Meanwhile, Washington and Brussels are in agreement on three essential (and non-negotiable) takeaways:

1. An immediate cessation of all uranium enrichment programs (to both 20% and 3% levels);
2. A withdrawal of the fuel already enriched to locations outside Iran; and
3. The dismantling of the underground installation below Fordo outside the sacred city of Qom.

Contacts in Brussels are adamant that the EU will not accept the Iranian demand as a precondition for extending the talks. Meanwhile, a number of Iranian sources – including directors at the Tehran-based International Center for Energy Studies' OPEC Research Office, senior officials in the Ministry of Oil, media analysts, and members of the Majlis (parliament) – are unanimous in saying Iran will never agree to the last two Western demands and, in all probability, the initial one either.

Negotiations often begin with one or both sides making demands that are later mollified or dropped altogether. In this instance, however, the demands on each side are central to the essential and strategic position the party is obliged to defend. That means the "overture" being put forward by Iran is nothing other than a play for time.

"They cannot accept any of the European points without sacrificing their strategic position, and they have nothing of substance to provide as a counter-negotiating stance," a veteran Middle East analyst with Stanhousie Demant in Amman, stressed in an April 21 telephone conversation.

Faking Business as Usual

Official Tehran continues to convey an impression that the sanctions are having no effect on either Iran's ability to sell its crude or entice foreign companies to enter into projects. However, the arguments are ringing hollow.

For example, National Iranian Oil Co. (NIOC) managing director Javid Oji (who also serves as a deputy minister of oil) said on April 17 that the country is finalizing deals to export natural gas to a European and two Persian Gulf states. Yet, as in the past when such statements have been made by a variety of Iranian officials, Oji refused either to name the countries or provide any details. He did mention that gas would be exported to Europe across Turkey. Oji further said a decision to sell gas to Swiss EGL would require trilateral talks between the three countries involved.

The EGL connection, which has been on the table for a while, remains a potential problem, given the company's involvement in the Trans Adriatic Pipeline (TAP) currently contending with three others as a conduit for gas produced in Phase 2 at the Azerbaijani giant offshore Shah Deniz field.

The Ministry of Oil is also once again touting a gas export agreement with Iraq. According to the deal, 25 million cubic meters a day would move to Iraq on a five-year contract that is subject to renewal for two additional five-year terms. The primary end users are intended to be electricity generating plants and industrial facilities.

However, sources in both the Ministry of Oil and the Ministry of Electricity in Baghdad are quick to point out the accord has not been finalized. "We have not even reviewed the initial wording of the governing protocol," one Iraqi source close to the negotiations told me earlier in April. Meanwhile, multiple contacts are indicating pressure has come from Washington to delay the project, especially since a Royal/Dutch Shell project is once again underway to utilize associated gas a fuel source for power generation.

Oji has also reported that gas reinjections into crude oil wells are increasing, The average daily rate has reached 12 million cubic meters, the highest ever achieved by the National Iranian Gas Co. (NIGC). This volume of gas was injected to Koupal, Korenj, and Maroun oil fields, and doubles the volume compared to the preceding year.

Yet the amount injected remains insufficient to redress already significant loss of pressure at the country's oldest fields, from which Iran still extracts the brunt of its oil bound for export. The ongoing issue has been raised in the Majlis on several occasions, prompting members of the standing energy committee twice to challenge both the ministry and the presidential administration on its ability to keep production from falling further because of an accelerating decline in reservoir pressure.

Problems for Foreign Companies

Sources throughout the foreign company contingent still in Iran are acknowledging across the board that Western sanctions are making business very difficult. In addition to the genuine concerns about facing reprisals against assets or projects in either the U.S. or Europe, there is the accelerating problem of restrictions against access to Western technology, expertise, equipment, and even spare parts.

This was certainly in evidence when this year's International Oil, Gas, Refining, and Petrochemical Exhibition opened in northern Tehran on April 17. This was the 17th edition of the annual affair. Contacts acknowledge some 75% of the participants were from Iranian companies, while foreign exhibitors were down about 40% from last year. Absent were main participants from past exhibitions, such as ENI, Royal Dutch/Shell, Total, Saipem, and the main Western providers of oil field services.

Even those in attendance, representing a range of Chinese companies, along with foreign-Iranian joint ventures (most predating the sanctions) and a few holdouts (Statoil, for example), were providing little indication that essential technology or knowhow was available. Particularly lacking were representatives of companies providing the one thing perhaps most needed in the current Iranian climate – quality control.

Providers of specialized services, equipment, valves, pressure pumping, and other products confirm that Western governments in general, and Washington, London, Paris, and Tokyo in particular, are preventing them from delivering hi-tech equipment and parts to Iran.

"The [Iranian] market is rapidly reaching a point where projects cannot be adequately operated because access to essential equipment and support is lacking," the representative of a French-based technology provider admitted.

To some extent, this is providing a short-term opportunity for Asian service providers to establish a bigger foothold in Iran. Unfortunately for the official rhetoric coming out of Tehran these days, in which the refrain is often advanced that new foreign providers are replacing those prevented by Western sanctions from participating, this exchange of providers is not enough.

Asian service companies able to avoid current sanctions are able to satisfy some needs, but the specialized and technical expertise required to deal with the worsening operational, reservoir, and geological problems arising (especially at older Iranian fields) are provided by industry leaders subject to U.S. and EU restrictions.

This is requiring that the Ministry of Oil and NIOC rely on domestic providers. Except for the most straight-forward and uncomplicated service, parts, and support, this local reliance initiative has failed miserably. In several cases, it has worsened the field situation, forced delays on project completions or obliged that operations be suspended altogether.

Even when a way can be found to provide outside expertise without running afoul of the sanctions, there remains the problem of payment. Given the combination of limited access to international banking, severe currency exchange problems and a local currency whose value is disappearing (the "official" rate remains 3,200 rials to the dollar; the effective rate is closer to 12,500, but the ability to secure a bank transfer is extremely difficult at any exchange rate offered), requires that NIOC pay in kind.

That means companies are paid in crude oil. And with the EU embargo of imported Iranian crude set to take effect July 1, nobody knows whether such payment arrangements will be available.

"This is going to adversely affect any contract provisions beyond a few months or even beyond a single transaction," one regional market veteran told me on April 23, "even if the cumbersome Iranian negotiating process allows it."

Chinese companies were expected to profit from the worsening situation. For one thing, China has never recognized the U.S. and EU sanctions, preferring to restrict comment to its compliance only with decisions from the U.N. Security Council. Nonetheless, Beijing has been careful to refrain from directly antagonizing either Washington or Brussels. Playing both ends from the middle, Chinese companies have until recently believed they could establish major footholds in Iran without creating significant political problems elsewhere.

For another, China as the largest importer of Iranian oil has leverage. That it also runs a trade surplus with Tehran merely expands its bargaining power. The surplus effectively allows it to subsidize oil purchases with its own exports to Iran, significantly cutting the actual expense of the crude trade.

But neither caveat is helping when it comes to providing field services inside the country. There Chinese companies have rather noticeably of late cut their interest in attracting new contracts. Some have even suspended activities altogether. Company representatives have not made public statements on the matter, nor will my at Great Wall Drilling or Sinopec comment for the record.

Nonetheless, it appears clear that the Chinese are now facing the same problems as other potential providers. The Iranians are providing contract terms that are simply not viable.

Meanwhile, the official bravado continues. Minister of Oil Rostam Qasemi kicked off the oil exhibition with a speech highlighting what Iran has accomplished in defiance of the sanctions. He noted in particular that the country would secure the $200 billion necessary to accomplish the five-year plan due to end in 2015.

Vice-President Mohammad-Reza Rahimi also chimed in by announcing that Iran would soon sign deals worth $44 billion with foreign companies in attendance at the exhibition. As has been the case repeatedly in the past with similar statements of breakthroughs followed by nothing of substance, Rahimi declined to name either the companies or the projects.

It was relaxing… mostly.

Earlier this week, we were dealing with brush fires. This is the season for it in the Bahamas. March and April are dry months, just before the rains that will be coming down for most of May.

But the primary culprit behind the fires down here is a very irritating one – beer bottles thrown in the scrub by partygoers. Some explode from the heat. But whether intact or in pieces, they magnify the sun's rays and start fires all over the island.

I'll shortly be dealing with another kind of brush fire. There will be a quick turnaround period between our landing in Pittsburgh at 8 pm on Sunday and my 6 am flight out to Houston the next morning.

I'll be attending a meeting on West African oil.

In Houston, I will be meeting with officials of the Nigerian National Oil Company and the Nigerian government. This has become the normal way my official advisories take place these days – an initial session in the U.S. and then follow-up advisories in the home capital on more substantive matters.

But this situation is a little different. Normally, it is the U.S. State Department that initiates such contacts. This time, given the political difficulties of a nation that seems forever teetering on civil war, the request comes from the Nigerians directly.

There are three reasons why this country remains one of the most difficult in which to conduct business. The first addresses security amidst regional differences and a delta region that is a tinder box of revolution, secession, tribal warfare, and flat out criminal activity. It is hot, sticky, bug-infested, and dangerous…

But it holds a great deal of light, sweet crude.

Such oil is highly desired these days. There is little of it left worldwide. It requires less processing, since it does not have much sulfur to remove or weight to thin out.

And that increases profit margins.

Still, it also guarantees competition, political intrigue, and ecological damage, along with kidnappings of company personnel, attacks on rigs and pipelines, inter-village conflict, and even the occasional revenge homicide.

The second factor making life difficult for oil extraction in Nigeria is the corruption. We're talking about one of the most corrupt nations on the planet. There are laws on the books, plenty of them. But they are regularly ignored by officials who see an easy opportunity to make a lot of money for themselves.

A Nigerian newspaper editor summed it up a while back by telling me (in all seriousness), "If the amount of the bribe is less than $10 million U.S., it isn't even worth the newspaper space to report it. We would also need to double the size of a daily edition to cover them all."

Third is the criminal factor. Whenever there is a great deal of money available, that attracts fraud, deception, and worse, especially when it is a developing country with deep-seated historical divisions.

Remember, Nigeria is the place that invented those email frauds requesting assistance in moving money for an apparent "can't miss" chance to make some big bucks quickly. After all, all you need do is set up an empty bank account, right? These are known around the globe as "409 scams" – after the Nigerian Commercial Code section they violate.

But the crime goes deeper. Little, if any, importing of oil products takes place outside organized crime. Sounds strange that one would import into an oil-wealthy country like Nigeria, doesn't it? But the fact is, there is little refinery capacity. So most oil produced there is shipped out as crude. Then, the country produces only 15% of the electricity needed daily. That means 85% must come from private generators operating on diesel, and that fuel must be bought into the country.

The diesel traffic into the Nigerian market may be the most criminally controlled and nasty business anywhere in the world. The tankers park (that is, "bunker") out beyond the eight-mile national jurisdiction zone, and shuttle craft – directed by the Nigerian mob – ferry the fuel to shore.

So, with all these problems, why bother setting up operations there?

Simple, Africa is one of two places left in the world where there is a great deal of potential oil, needed by a world becoming concerned over supply constriction. The other place is the Arctic.

Africa is much cheaper.

In West Africa, Nigeria and Angola have ushered in an oil rush that has spread to neighboring countries as the true expanse of these basins comes to light. In addition, the deep water off the coast of the region is developing into one of the most promising large field locations remaining in the world. Royal Dutch/Shell (NYSE: RDS-A), Chevron (NYSE: CVR) and ExxonMobil (NYSE:XOM) are already there with huge projects.

But it is a range of smaller companies (mid and small cap) that are likely to make the biggest impact for investors. Thus far, while many trade only on the London Stock Exchange (LSE) or the U.K.'s less-regulated Alternative Investment Market (AIM), there are a couple that are available for trade in the U.S. I have already advised my subscribers of both Energy Advantage and Energy Inner Circle on the best and most liquid of these moves.

Others will be coming into play shortly.

Problems in places like Nigeria have developed over generations and will be very difficult to displace.

But the oil riches coming from Africa will oblige us to keep going back and trying.

Sincerely,

Kent

Even though opportunity abounds, there are plenty of factors driving ordinary investors away from the market, like global political tensions, ongoing concerns about available supplies, credit limitations for producers, increased volatility on the derivatives markets, and rising global demand.

There's a lot of noise, and short-term irrationality is trumping fundamentals.

But even amid the confusion, we know one thing for sure.

The price of oil is going to accelerate.

As Kent said on Monday, we have a very different dynamic taking place in the markets from the events of 2008. Three years ago, speculation drove oil prices, but an outside crisis decimated the global markets (namely, the subprime mortgage mess and the corresponding credit freeze).

But this time, we're experiencing a constriction produced by a significant cutback in new oil drilling. With greater unconventional production in the cards and greater concerns about the availability of supply, we're witnessing a perfectly predictable storm of events that will drive prices higher.

Still there's one thing that Kent and I continue to stress before you go out and start buying up energy stocks. That's this:

Rising oil prices will not drive similar performances in all energy companies.

You need to grasp an overall strategy to profit this time around.

The lack of cheap supplies and the cost of procurement in unconventional sources are major concerns. So is the acceleration in short-term swings in volatility. We are entering a period of boosted unconventional oil and gas production to tackle these challenges.

Access to unconventional sources has set off an energy boom here in the United States, as new technologies have enabled this country to greatly improve its oil and gas sourcing. Moving forward, the United States will look to its oil and gas shale plays and to source an expanding fuel supply from our neighbor to the north: Canada.

But it won't be cheap to do this, especially while increased swings in volatility become the norm.

So what's the best way to play volatility while managing your risk?

There's Always Money in the Midstream

The best lesson I've learned came when I first met Kent last year at an investment conference. Few people caught this because they were too focused on the names of the companies he was discussing, and not on the strategy.

He said that he told his graduate students that it didn't matter if the price of oil was going up or down in the short term. So long as you plant yourself in the middle of the supply chain, you're going to make some money.

We've talked a lot about this in the past, but it's worth stressing because it's part of a greater strategy.

Interest continues to swell in master limited partnerships (MLPs) – partnerships that are publicly traded on a securities exchange. These midstream companies connect the upstream producers of oil and gas to the downstream refiners and retail companies.

In energy, these MLPs are structured in various ways, but essentially comprise companies that own and operate storage facilities, pipelines, and terminals for oil and gas. An MLP provides the storage and distribution, while the operating companies and other users pay fees.

Those fees may be for the transport of oil or gas. But in the case of gas, much of the pipeline system really ends up being used for storage purposes. For most parties, unused gas is a discounted asset. But if you are the entity being paid for the storage space, it is a continuing source of revenue.

Until recently, the plays here have been in single entities – Plains All American Pipeline (NYSE:PAA), Spectra Energy Partners (NYSE:SEP) or Chesapeake Midstream Partners (NYSE:CHKM), for example.

But there are other ways to get in on the action, all while capturing the opportunity for share appreciation and strong dividend returns. There are now more than 20 sufficiently liquid exchange-traded vehicles providing entry into a large number of MLPs. All of them provide a combination of oil and gas plays in storage, pipelines, and terminals.

But the best option has been the JP Morgan Alerian MLP Index ETN (NYSE:AMJ).

This exchange-traded note offers exposure to the Alerian MLP Index – a market-cap weighted, float-adjusted index established to provide investors with the ability to track the entire oil and gas MLP sector.

The Alerian Fund is balanced a bit more toward pipelines. And it's balanced slightly more toward gas than oil, compared to other major ETN competitors.

Even though we are looking for more of a pop in the gas storage situation, it's important to maintain exposure to both oil and gas… for liquidity reasons.

It still allows us, therefore, to play the gas side (where the greater upside is likely to be), while providing an easy trading path in and out.

And you'll collect some decent income along the way.

AMJ comes with a 5.0% yield right now – the current coupon amount ($0.4825 as of April 24) annualized and divided by the closing price.

The Energy Advantage portfolio has recommended it since September 2010. As of now, we're up 19.8% on the share price alone, and that's not including the healthy dividends the stock receives on a quarterly basis.

Remember, MLPs pass along partnership dividends to unit holders. And the only genuine way to participate in that flow is to have access to the action on the interest coupons. AMJ shares give you such access… and some substantial profit potential, as well.

Of course, the AMJ is just one part of the larger approach to the markets in the year ahead. And it's been a staple of Kent's core holdings in the Energy Advantage portfolio, which he just restructured last week to ensure greater overall performance in the months ahead.

With greater production and more pipeline infrastructure being built in the months and years ahead, the midstream sector continues to provide significant opportunity in share appreciation and ever-increasing dividend payments to sweeten the deal.

Sincerely,
James

P.S. Kent's presentation today centers on the biggest money-making trend in the markets. And you can get access to his five favorite MLPs just by watching it right here.