Week Ending March 14

Oil posts weekly gain snapping seven-week losing streak amid geopolitical tensions and supply concerns

WTI prices rose on Friday, settling at $67.18/Bbl, breaking a seven-week losing streak. The weekly gain was driven by a rebound in U.S. equity markets and stalled peace talks between Russia and Ukraine. The price increase followed President Putin’s hesitance in accepting a US plan for a 30-day ceasefire. Additionally, further sanctions were placed on Iranian entities and payment channels for Russian energy, contributing to the upward price movement. Domestically, positive CPI numbers and EIA crude inventories coming in lower than expected provided additional support for prices midweek.

The latest data from the International Energy Agency (IEA) indicates that supply will increase, but demand growth will slow compared to last year. The IEA forecasts an oversupplied market in 2025, with a surplus of 600 MBbl/d. It should be noted, the IEA’s 2025 supply forecast does not incorporate the planned increases from OPEC+. Meanwhile, demand from non-OECD countries is projected to increase by 1.1 MMBbl/d in 2025, with China contributing 230 MBbl/d. However, China’s consumer inflation has dropped below zero for the first time in 13 months, which adds to deflationary pressures and raises concerns that global demand could struggle to pick up momentum in the latter half of the year.

In addition to the supply-demand dynamics, China faces the potential risk of a trade war with the United States. President Trump has also expanded his trade conflict with Europe, after the EU retaliated against the US's 25% tariffs on aluminum and steel by imposing a 50% tariff on US liquor. In response, Trump threatened to impose a 200% excise tax on European wine and liquor. Canada has also announced over $20 billion in retaliatory measures. The growing trade tensions contribute to market fears that such disputes could negatively impact global demand growth.

Despite these bearish factors, including oversupply and escalating trade tensions, prices managed to post a gain this week. The announcement of new sanctions had a temporary positive effect, but according to the revised IEA data, it seems that sanctions have not significantly affected global supply in a way that could match the forecasted demand. Given the projections of oversupply, AEGIS maintains a neutral stance on prices, with higher probability of downward pressure versus upside.

April 2025 natural gas settles lower on the week after reaching the highest level in ten years.

The prompt Henry Hub contract finished the week down 29c to $4.11/MMbtu, although it is down over 75c from this week’s highs. The Summer ’25 strip closed 23c lower at $4.42/MMbtu, while Winter ‘24/’25 was mostly unchanged at $5.05, and Summer ’26 actually gained 11c to $4.17/MMbtu.

The withdrawal season is coming to a close, with next week’s EIA report expected to show the final draw of the season. Inventories are looking to start summer around 1.68 Tcf, or about -200 Bcf below the five-year average. This winter has seen storage levels drop significantly from nearly 700 bcf above the five-year average to current levels, leading to an impressive rally in the next few seasons.

LNG feedgas demand has been at the forefront of many market participants' attention lately, with total US LNG demand remaining strong at around 16 Bcf/d. Plaquemines LNG stage 1 has been ramping up quickly, and Venture Global’s quarterly earnings call last week portrayed an even more bullish picture. Regarding the company’s cargo shipment outlook for Plaquemines, it would imply stage 2 could be taking material gas volumes by next winter. In addition to a quicker start-up, the facility’s liquefaction trains have been operating at 140% of nameplate capacity.

In addition to some surprising developments from Plaquemines, Freeport LNG said they may undertake another small capacity expansion this summer. Last year, the export plant expanded its capacity by about 0.2 Bcf/d through what it described as a “debottlenecking” project. Freeport did not mention how much capacity they could add this summer.

AEGIS has been recommending clients take advantage of the recent price rally and the sharp increase in call-put skew. A surge in call skew, or the relative expensiveness of call options compared to put options, has made costless collars potentially more attractive to producers.