Week Ending March 26

"Whipsawed" is the best way to describe the week's price action. Click here to see a chart with some of this week's driving forces. Despite all the oil price volatility, WTI settled at $60.97/Bbl on Friday the 26th, up 45c from the previous Friday.

WTI price has been noisy, but the fundamentals have changed little. The Suez Canal blockage reported on Wednesday is causing disruptions in the global crude market, providing a temporary price boost to particular commodities. Offsetting some of the more bullish news items is the recent rise in the dollar. On March 25, the dollar spot index settled close to 93, a four-month high. Crude oil prices and the dollar typically trade in an inverse relationship.

Oil prices may be off their mid-March highs, but AEGIS still urges clients to take advantage of current price levels. We think risk still exists to the downside despite the recent sell-off. Cal 2022 remains at $55.80/Bbl, and our trade desk has continued to lean toward advising swaps. However, skew isn't too punitive; a Cal 2022 costless collar is priced at $50 X $60.39 as of Friday afternoon.

The natural gas heating season likely experienced its last net withdrawal during the week that ended March 19. Injection season has likely begun. In typical shoulder-season fashion, natural gas price action has been rather muted over the past few weeks. The Summer 2021 strip was at $2.71 on March 12 and settled Friday, March 26 at $2.69.

March weather has been very mild, as much of this past winter has been in aggregate. According to NOAA, February was an outlier, as it ranked the 19th coldest February over the past 127 years. At the end of February, the market was concerned about ending winter with very low stock levels. A mild March caused natural gas storage to end the heating season at a higher level than previously expected.

AEGIS remains bullish as we still see an undersupplied market. We believe the longer price takes to rise, the more price inflation it means for Winter 2021-2022. But we are watching production levels closely as they appear to be ticking higher, and renewables are threatening gas demand this spring.

The AEGIS trade desk recommends costless collars across the board due to the current view and call skew winter months.