Week Ending February 13

Crude posts another weekly decline as surplus outlook outweighs geopolitical support

Crude suffered a second consecutive weekly loss as easing disruption fears weighed against increasing signals of structural oversupply. Diplomatic engagement between the US and Iran reduced the immediacy of escalation risk, yet unresolved tensions preserved a residual geopolitical premium.

The latest Oil Market Report from the IEA indicates global inventories are expanding at the fastest pace since the pandemic, with stockpiles rising sharply and OECD inventories returning above historical norms. Demand growth expectations have been revised lower and the agency now anticipates a surplus exceeding 3.7 MMBbl/d in 2026, underscoring the scale of the emerging imbalance.

The EIA’s February Short-Term Energy Outlook reinforces this direction. Global inventories are projected to build materially in 2026 and remain elevated into 2027 as supply growth continues to outpace demand. WTI spot prices are expected to average near $53/Bbl in 2026 and decline further in 2027, although OPEC+ restraint and continued Chinese strategic stockpiling may slow the pace of downside.

Not all market participants share the same interpretation of emerging oversupply. Goldman Sachs’ Dean Struyven notes that excess barrels are concentrated in regions with limited influence on benchmark pricing, while several OPEC+ members are signaling room to restart supply increases as early as April, arguing fears of a broad global glut may be overstated. The alliance’s final production decision may ultimately hinge on the trajectory of US policy toward Iran and whether geopolitical tensions escalate or continue to ease.

Taken together, the week’s developments reinforce a market shifting its focus back toward fundamentals rather than geopolitics. While unresolved Middle East risk can still generate episodic volatility, expanding inventories and slowing demand growth continue to define the medium-term outlook. AEGIS maintains a bearish view, and unless disruption risk materially removes supply, rallies are likely to fade as crude re-anchors to expectations of a structurally looser global balance.

Natural gas posts second weekly loss amid weaker demand outlook

The March Henry Hub contract lost 19c this week to settle at $3.24/MMbtu, as temperatures look relatively mild for the remainder of February. The Summer ’26 strip lost 13c to settle at $3.39/MMbtu, and Winter ‘26/’27 fell 9c to finish at $4.22/MMbtu.

While prices traded lower this week, most of the movement occurred from last Friday through the start of trading on Sunday night. A milder shift in weather forecasts over the weekend resulted in a bearish shift in the near-term demand outlook. Lower-48 population-weighted temperatures are currently forecast to be warmer than the ten-year average next week, although the following week should see temperatures cool down again, falling below the ten-year average. This should result in a smaller withdrawal from storage for the week ending February 20.

This week, the EIA reported another sizeable withdrawal from storage for last week. 249 Bcf was pulled from underground inventories last week, making the string of withdrawals over the last two weeks the largest on record, as inventories have fallen 609 Bcf in that time. Lower-48 inventories are now at a deficit of -130 Bcf to the five-year average, although that could shrink over the next two weeks based on current forecasts. Despite that, our model still projects inventories to be in a deficit at the start of summer through the start of next winter.