Energy Funds Get a Lift From Higher Prices

Just two weeks ago, with West Texas intermediate crude oil trading at $73.36 per barrel, I called the bottom of the 2007 summer slide by predicting a move toward $80 oil. Wasting no time, crude oil closed at a record high of $80.09 on Thursday.

How did oil top $80?

The Energy Department cites lower inventories of both crude oil and gasoline. Hurricane Humberto popped up out of nowhere, knocking out power to Port Arthur, Texas, refineries owned by Total SA, Valero Energy(VLO Quote) and Royal Dutch Shell(RDS-B Quote) as well as to 114,000 Entergy(ETR Quote) customers. These factors, combined with a weakening dollar and pessimistic predictions of more Atlantic hurricanes, helped oil to the new record high.

While oil made its run to these heights, natural gas prices rebounded off the lower end of its $5.50-to-$9.00 per million British thermal unit trading range. The top-performing energy fund, the United States Natural Gas Fund (UNG Quote), rose by 8.66% for the week ended Sept. 13 as the Henry Hub natural gas futures contracts held by the fund moved up faster than the 3.65% advance in the spot price.

The futures contracts on West Texas intermediate light crude oil held by the United States Oil Fund (USO Quote) helped the fund to a return of 4.41%, making it the second-best performer. One more factor spurring on the rise in oil is increasing global energy demand.

The WisdomTree International Energy Sector Fund (DKA Quote), which invests in oil- and gas-related companies from around the globe, rose 3.73%. The ETF has no U.S. holdings, but the Netherlands accounts for 15.9%, the U.K. 13.0%, France 12.1%, Italy 11.4% and Australia 11.3%.

The fund's best-performing holding this week is CNOOC Ltd (CEO Quote), the largest Chinese national offshore oil and gas producer, which gained 7.87%. It was helped as BP (BP Quote), its partner on a liquefied natural gas project in Tangguh, Indonesia, received a loan to complete the project.

Top-Performing Energy Funds Ranked by total return for the week ending Sept. 13
Fund	Ticker	Rating	Fund Type	1 Week Total Return
United States Natural Gas Fund LP	UNG	U	ETF	8.66%
United States Oil Fund LP	USO	E	ETF	4.41%
WisdomTree International Energy Sector Fund	DKA	U	ETF	3.73%
Claymore/SWM Canadian Energy Income Index ETF	ENY	U	ETF	3.59%
First Trust ISE-Revere Natural Gas Index Fund	FCG	U	ETF	2.11%
BlackRock Global Resources Fund	SSGRX	C-	Open-End	2.06%
iShares S&P Global Energy Sector Index Fund	IXC	A	ETF	2.04%
iShares DJ US Oil & Gas Expl & Prod Index Fund	IEO	C+	ETF	1.99%
Market Vectors Nuclear Energy ETF	NLR	U	ETF	1.96%
JennDry Funds - Jennison Natural Resources Fund Inc	PRGNX	B-	Open-End	1.92%
Source: Bloomberg

Read here for an explanation of our ratings.

The worst-performing energy fund this week was (TYG Quote)Tortoise Energy Infrastructure Corp (TYG), a closed-end fund that sank 6.30% over the five trading days ended Thursday. Drilling down to the master limited partnership holdings that lost the most, we find Williams Partners LP (WPZ Quote) down 4.98%, Magellan Midstream Partners LP (MMP Quote) down 3.76% and Plains All American Pipeline LP (PAA Quote) down 3.54%.

Magellan is currently in hot water with the Environmental Protection Agency over ammonia and petroleum spills from its pipelines. Meanwhile, Plains All American Pipeline's refinery spilled 4,000 gallons of gasoline in Martinez, Calif., but was able to contain the leak behind a 6-foot dike.

The second-worst performer, losing 5.06% for the period, was the (TYY Quote)Tortoise Energy Capital Corp (TYY), another closed-end fund. It was burdened by a 6.16% decline in Regency Energy Partners LP (RGNC Quote) and a slide of 5.13% in Boardwalk Pipeline Partners LP (BWP Quote).

Regency Energy released a letter from the Securities and Exchange Commission detailing how it should improve its financial disclosure. Boardwalk Pipelines issued an SEC filing to disclose the end of negotiations to sell a 49% stake in its Gulf Crossing Pipeline.

Worst Performing Energy Funds Ranked by returns for the week ending Sept. 13.
Fund	Ticker	Rating	Fund Type	1 Week Total Return
Tortoise Energy Infrastructure Corp	TYG	B-	Closed-End	-6.30%
Tortoise Energy Capital Corp	TYY	B-	Closed-End	-5.06%
Kayne Anderson Energy Development Co	KED	U	Closed-End	-4.74%
Fiduciary/Claymore MLP Opportunity Fund	FMO	A-	Closed-End	-4.21%
Kayne Anderson MLP Investment Co	KYN	B	Closed-End	-4.17%
Tortoise North American Energy Corp	TYN	B+	Closed-End	-3.91%
PowerShares WilderHill Progressive Energy Portfolio	PUW	U	ETF	-2.66%
BearLinx Alerian MLP Select Index ETN	BSR	U	ETF	-2.38%
UltraShort Oil & Gas ProShares	DUG	U	ETF	-2.16%
Market Vectors Global Alternative Energy ETF	GEX	U	ETF	-1.90%
Source: Bloomberg

Read this for an explanation of our ratings.

On Tuesday, OPEC declared an increase of 500,000 barrels of output to ease its fear that it would get blamed for sending the U.S. into a recession by not doing enough to slow the rise in oil prices.

This move was seen as confirmation of a tight oil-supply environment, so it did little to ease prices. The additional half million barrels are to be added to the 26.7 million barrels per day official output of the 10 OPEC members beginning Nov. 1.

A Bloomberg survey of oil analysts and traders is predicting lower crude prices, possibly from reduced demand from refineries shutting down for maintenance. If Tropical Storm Ingrid survives the wind shear and heads toward Florida or the Gulf of Mexico, crude oil prices may hang on to current levels. Personally, from my desk in South Florida, I'm looking for a break in the weather.