Natural Gas (Henry Hub)
Summer 2025 - Neutral
Fundamentals
- Our models start summer injection season at 1.72 Tcf (below the new five-year average)
- Following bullish January and February weather, forward curve has repriced higher with Summer 25 trading above $4.25
- Plaquemines & Corpus Christi LNG expect to add 4 Bcf/d of additional LNG demand by December 2025
- Concern about supply meeting anticipated LNG demand growth by winter
Strategy
- Aggressively hedge on jumps in price (weather driven)
- Summer 2025 swap price has climbed above $4.25, the highest price since 2022
- Option skew favors calls which allows producers to capture additional value with tight collars rather than swaps
Winter 25/26 Onward - Bullish
Fundamentals
- LNG demand growth really starts to ramp in the 2H 2025 and continues to grow rapidly into 2027
- Current estimates are for nearly 20 Bcf/d of LNG demand by the start of 2027
- Permian supply will grow with new pipe in late '26 and '27, but more supply is likely needed
- There becomes a "call on Haynesville" to bridge the gap between new LNG demand and supply
Strategy
- Layer in protection on front of curve rallies (while we are bullish, price could be dragged lower before we get to these tenors)
- By waiting you may be forced to hedge at lower prices before strip rallies
- Take advantage of call skew with option structures
Crude (WTI)
Bal 25 - Neutral
Fundamentals
- Trump is a wildcard! His rhetoric favors a lower oil price in the face of sanctions to Iran and Russia
- Supply is forecasted to outpace demand in 2025
- Global demand growth forecasts remain underwhelming but trending less bearish
- OPEC+ has announced they will start bringing back voluntary and mandated production cuts in April (2.2 MMBbl/d of voluntary cuts)
- Voluntary cuts are scheduled to be unwound by 140 MBbl/d each month from April 2025 through September 2026
- These barrels come at a time when the market already looks oversupplied for 2025
- Trump: Saudi Arabia, OPEC asked to cut oil prices
- Trump's use of tariffs and ensuing trade war has cast clouds around demand growth projections
Strategy
- Hedge aggressively via swaps on price rallies as the Bal 25 strip has been trading in a tight band ($63 to $76) for the past two years
- If price in the low $60s is palatable, utilize collars to provide some additional upside participation
Cal 26 - Neutral
Fundamentals
- Modest global demand growth moving forward
- OPEC spare capacity is estimated to remain near 6 MMBl/d
Strategy
- Systematically add hedges when economically viable
