Week Ending January 24

Oil posts first weekly loss of 2025

WTI finished the week lower by more than $2 to $74.60/Bbl as prices retreated from recent highs. This is the first lower weekly settlement of 2025, following the rally seen in the past few weeks. Market participants continued to evaluate the possible impact of new sanctions on Russia, while comments from President Trump on OPEC pressured prices lower.

While speaking at Davos, President Trump said he would ask Saudi Arabia and other OPEC nations to “bring down the cost of oil,” adding that “if the price came down, the Ukraine-Russia war would end immediately.” Oil prices immediately fell following these comments. While OPEC is already planning to boost production this year, they have delayed this plan to restore output multiple times. Meanwhile, Russian President Vladimir Putin said he is willing to talk to Trump on oil and energy issues. Putin said in an interview, “We have a lot to discuss here, and there are other energy issues that might be mutually interesting,”

Buyers in Asia continued to scramble to secure supply due to the possibility of fewer cargoes from Russia. According to India's oil secretary, Indian refiners have until February 27 to unload sanctioned Russian cargoes. Several Russian tankers have resorted to changing flags to avoid detection, as Barbados and Panama are de-registering vessels on the US and UK sanctions list. While the ships will likely be able to find new flags, the sanctions are beginning to disrupt Russia’s oil export logistics.

AEGIS continues recommending clients hedge aggressively via swaps on price rallies as the Cal 25 strip has been trading in a tight band ($63 to $76) for the past two years. If prices in the low $60s are acceptable, utilize collars to provide some additional upside participation.

Natural gas settles above $4/MMbtu

Natural gas prices ended the week nearly flat at $4.03/MMBtu despite a week of extreme winter weather. A polar vortex dipped into Texas and the Southeast, bringing unusually cold temperatures, with snowfall recorded in Houston and southern Louisiana.

The latest EIA storage report shows that gas in underground storage is now just 21 Bcf above the five-year average. January remains on track to account for a nearly 1 Tcf drawdown in gas stocks. To gauge the impact of this, consider the end-of-season (EOS) storage projections. The current EOS forecast for April sits at 1.75 Tcf, whereas if January weather had been at the 10-year climate normal, the EOS projection would have been 1.94 Tcf. This means January’s colder-than-normal weather has resulted in 200 Bcf more gas demand than what would have been expected under normal conditions.

In response, the Nymex forward curve has moved higher, with Cal 2025 now trading at $3.89, up significantly from $3.18 just a month ago. Looking ahead to February, uncertainty remains high. Weather models vary widely, but the median forecast suggests temperatures will be near the 10-year average. However, if February turns out warmer than expected and US production rebounds quickly from recent freeze-offs, we could see weakness in the forward curve.

Hedging activity was extremely strong in January, as the rally in the forward curve drove increased positioning. We continue to recommend swaps for summer strips and collars for winter to manage exposure effectively.