Week Ending April 9

WTI finished Friday at$59.32/Bbl, a loss of $2.13 from the previous week. The May WTI contract has traded sideways for the past four weeks, settling within a $3.80 range top to bottom. The lateral price action could imply a more stable supply and demand background as OPEC+ balances production increases with a demand recovery. As oil prices have relaxed, a faster end to the OPEC+ supply cuts seems less likely.

Concerns about the pace of demand improvements due to new lockdowns and OPEC+'s plan to increase production have kept price from rallying. The price recovery in late 2020 and early 2021 was due to supply restrictions, and the cartel continues to leave many millions of barrels on the sidelines to help support price. The demand recovery has been slow, but air travel is showing a quick revival since February, at least in the TSA lines.

Factors threatening oil prices are more severe lockdowns, progress on talks between Iran and the US, and OPEC compliance. It's important to remember that those who systematically de-risk their portfolios tend to perform better in the long run. Traders relying on chart patterns are rightly perplexed right now, as prices have not established a direction.

Natural gas prices have been mostly flat for over a month now. The front of the curve was down about 12c to $2.52/MMbtu for the week ended April 9, but the rest of the curve moved only a few pennies. A mild shoulder season for gas has kept prices from rising and has impacted the outlook for how storage will shake out heading into next winter. That being said, our weekly measures of supply and demand show a continued tightening over the past three to four weeks following some post-February freeze weakness.

Winter storm Uri likely had a lasting impact on gas demand - possibly seven weeks! The market is moving back to be undersupplied by at least 1 Bcf/d, by our estimates. Data from late February and March gave us pause on our upside-friendly view, but things look to be trending back to a more bullish stance. Watch out for some weakness this year that wasn't there last year; renewables could have a pronounced effect on gas prices this spring, when overall gas demand is low.

AEGIS hedge recommendations still favor the collar structure starting in July, given our upside view. A swap in the front two months is to protect against possible shoulder-season weakness.