Energy Prospectus

NEW YORK, March 5 | Mon Mar 5, 2012 3:21pm EST

NEW YORK, March 5 (Reuters) - Brent crude futures edged up on Monday in choppy trading as supply risks and tensions over Iran's nuclear program supported oil, while gains were limited by concerns about economic growth in China, Europe and the United States.

Brent April crude rose 15 cents, or 0.12 percent, to settle at $123.80 a barrel, having traded from $122.66 to $124.66.
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Despite all the noise out there, I expect crude oil prices to remain elevated. I will be sending out an updated profile on Denbury Resources (DNR) tomorrow. DNR is selling 45% of their oil into the Gulf Coast Market at close to Brent prices. They have double digit production growth locked in for several years.

As I said in the last newsletter, we want oil prices to hold in this range. The last thing we need is a spike in oil prices but when the shooting starts with Iran it is going to spike. Make sure your tank is full at all times and stay heavily weighted to oil. I see nothing positive for natural gas prices. - dan

Week in E&P – After five straight weekly increases, our market-weighted E&P
composite index declined last week (-3.2%) along with both oil and natural gas prices
while the broader markets notched very slight gains. The week was heavy in terms of
economic news, with the U.S. economy growing at a slightly faster rate in the fourth
quarter of last year than previously estimated, consumer confidence exceeding
expectations in reaching a 12-month high, initial jobless claims coming in slightly below
consensus, and January pending home sales rising 2.0% versus consensus estimates
calling for 0.1% uptick. On the other hand, January U.S. durable goods orders fell by
4.0% versus expectations for a 1.0% drop and the February ISM manufacturing index
unexpectedly fell to 52.4 from 54.1 in January. Also, in his semi-annual monetary policy
testimony, Fed Chairman Bernanke was slightly more encouraged by the recent
economic data and as a result offered no hint of any QE3, which the markets actually
viewed somewhat negatively. The economic data was also mixed across the Atlantic
with European February economic sentiment rising slightly although eurozone January
unemployment hit a euro-era high of 10.7%. Meanwhile, WTI spot oil prices declined
2.6% to ~$107/Bbl although Brent prices were just slightly lower at ~$124/Bbl. The
drop in oil prices was underscored by concerns that high prices might curb economic
growth while Bernanke’s remarks indicating a lower likelihood of QE3 any time soon
also weighed on oil prices. In addition, last week’s U.S. crude plus product inventory
report was somewhat mixed with a larger-than-expected build in crude stocks partially
offset by smaller-than-consensus declines in gasoline and distillate stocks. Natural gas
prices continued to fall last week with forecasts for warmer-than-normal weather near
term, a smaller-than-consensus storage withdrawal and spring just around the corner.
Thus, the front-month NYMEX natural gas futures contract declined 2.6% to
$2.48/MMBtu while the composite spot cash price fell 8.5% to $2.37/MMBtu.

Frank Holmes of US Global Investor commentary on why oil will continue to head higher is at the link below.

http://www.usfunds.com/investor-resources/frank-talk/

Also, around 50% of global production is in areas subject to a high risk of resource nationalism:

http://maplecroft.com/about/news/resour ... _2012.html