Natural Gas (Henry Hub)
Summer 2025 - Neutral
Fundamentals
- Post Winter storage bottomed on March 11 at 1.69 Tcf (216 Bcf below the five-year average)
- Warmer March weather led to an earlier than normal start to injection season
- The May25 contract peaked in mid-March at $4.27 before starting a relatively steady move lower
- Price declines accelerated down to the mid $3.00s following the US announcement of sweeping tariffs
- 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
- With gas prices for Summer 2025 in the mid $3.00s, we recommend swaps over collars
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!
- Trump's use of tariffs and ensuing trade war has caused downward revisions to global demand
- His rhetoric favors a lower oil price in the face of sanctions to Iran and Russia
- Supply is forecasted to outpace demand in 2025
- Latest demand forecasts are between 300 MBbl/d and 1 MMBbl/d of growth - much lower than a month ago
- 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
- OPEC+ recently announced an increased amount of volume for May 2025 of 400 MBbl/d - announced same day as "Liberation Day"
- These barrels come at a time when the market already looks oversupplied for 2025
Strategy
- Hedge into strength via swaps to protect as much cashflow as possible
- While the market may be oversold due 'risk off' trading, further downside is possible as demand growth now comes under question
Cal 26 - Neutral
Fundamentals
- Modest global demand growth moving forward could be hampered by a trade war
- OPEC spare capacity is estimated to remain near 6 MMBl/d
Strategy
- Systematically add hedges when economically viable
