The Tactical Energy portfolio climbed 1.3% during the month of May, outpacing its benchmark, the SPDR S&P Oil and Gas Exploration and Production ETF (XOP), which declined 0.7%. The S&P 500 Index (SPX) rose 2.1%.

Over the 365 days ending May 30th, the Tactical Energy portfolio has registered a 12.8% gain with 9.2% volatility, while its benchmark advanced 26.2%, with 19.9% volatility. The S&P 500 was up 18.7% while incurring 11.3% volatility over the same period.

In the energy markets, the July 2014 crude oil futures contract rose $3.60 during the month, settling at $102.71 on May 30th. This contract settled as high as $104.35 during May, a level it hadn’t broached in over three years.

The 2015 strip price settled at $93.43, up $2.65 over the month.

Continuing turmoil in the Ukraine and in Syria contributed to strength in crude oil prices. In contrast, natural gas prices fell during May, with the July 2014 contract closing the month down 30 cents, settling at $4.542.

The 2015 strip price dropped 16.3 cents, finishing at $4.256.  Even though overall natural gas inventories remain low, some weekly injections into storage were greater than expected, which led to weaker prices.

As always, there was a great deal of volatility among the individual components of the S&P Oil & Gas Exploration & Production Select Industry Index.

Clean Energy Fuels Corp. (CLNE) surged over 25 percent during May. Earlier in the month, Clean Energy Fuels reported earnings, and its revenue and physical volumes delivered exceeded analyst estimates. Towards the end of the month Morgan Stanley initiated coverage of the stock with a target price that was over 30 percent higher than where it had settled the previous day.

Sanchez Energy Corp (SN) was up almost 22 percent over the course of the month. Sanchez acquired acreage in the Eagle Ford from Royal Dutch Shell (RDS.A) that almost doubled their position there, and the stock market responded favorably to the news.

Goodrich Petroleum Corp. (GDP) climbed about 15 percent during May, continuing a rally that started in mid-February that has seen the stock more than double over the course of four months. During the four months prior to that, the company’s stock lost over half its value.

There were some significant May price declines among index components as well. Vaalco Energy (EGY), for example, dropped almost 30 percent during the month, largely due to a first quarter earnings announcement in which it was revealed its production declined somewhat from the first quarter of 2013 due to planned maintenance.

Additionally, revenues were down over 30 percent from the same period a year ago because a crude lifting occurred one day too late for the associated revenues to be included in first quarter earnings.

Quicksilver Resources (KWK) was another company that saw its stock price hit hard during May: it fell 26 percent.  Quicksilver reported lower production volumes and a greater than anticipated loss during the first quarter.

The stock price of W&T Offshore (WTI) dropped almost as much, falling 24 percent. The earnings report released May 6th disappointed investors.

Looking forward, as we head into summer, in my opinion I don’t foresee major weakness in the equity market. Some pundits have been predicting a market correction, and while that might occur, I believe the overall air of caution surrounding new market highs is incongruous with a significant market decline.

DISCLAIMER: The investments discussed are held in client accounts as of May 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.