Week Ending January 31

Oil finishes lower for a second week while tariffs are set to take effect on February 1

The March WTI contract settled lower by more than $1 to 72.53/Bbl, marking the second consecutive lower weekly settlement. Oil has given up most of this month's gains after prices briefly reached $80/Bbl. The market remains focused on the prospect of tariffs, which are set to take effect on February 1. Meanwhile, Goldman Sachs raised its Brent crude price target for 2025 and 2026.

On Friday, the Trump administration announced it would impose tariffs on Canada and Mexico while being vague about whether any products, such as oil, would be exempted. The administration is likely hoping to strike a deal very quickly and is intentionally not commenting on exemptions. If oil is included in the tariffs, there could be wide-reaching impacts on crude prices. Canadian oil differentials would widen, potentially leading to reduced flows into the US if Canadian producers decide to curtail production. Midwestern US refineries receive most of their feedstock from Canada, which could reduce Midwest refinery output and raise product prices within the US. Canadian and Mexican oil is also delivered to the US Gulf Coast, where it is refined or re-exported. Uncertainty remains high around what the tariffs will involve, how long they may be in place, or how market participants will react to them, but at face value, they appear to be a near-term bullish factor for WTI.

In other news, Goldman Sachs raised its price forecast for Brent crude in 2025 and 2026, citing sanctions on Russia and tariffs. The bank increased its 2025 price target to $78/Bbl from $76/Bbl and its 2026 forecast to $73/Bbl from $71/Bbl. However, Goldman did note that prices could temporarily rise to $93/Bbl if sanctions reduce Russian supply by 1 MMBbl/d or more. The bank also flagged the risk of tariffs on Canadian oil saying, “Canadian oil tariffs would risk unpopular, if temporary, gasoline price increases in the US Midwest.”

Natural Gas Prices Face Pressure as Mild February Offsets January’s Cold

Natural gas prices have come under heavy selling pressure as February weather forecasts turn mild following a very cold January. The March natural gas contract, now the prompt month, is barely holding above $3/MMBtu. Meanwhile, the Cal 2025 gas strip has dropped 49 cents from its January high of $4.06/MMBtu, settling at $3.57 as of Friday. According to The Commodity Weather Group, February heating degree days are expected to align with the 10-year normal—a stark contrast to January’s uber-bullish conditions.

As the market digests this shift, we reassess how 2025 will unfold. We maintain a neutral stance on the balance of the Cal 2025 strip, as we expect natural gas supply to keep pace with the new LNG demand ramping up since late 2024. The two key drivers of gas demand growth for 2025 remain Plaquemines LNG and Cheniere’s Corpus Christi LNG Stage 3. Plaquemines has recently been flowing at 1.2 Bcf/d, increasing ahead of schedule, while Corpus Christi has only shown preliminary signs of increased flows into Cheniere’s complex—nothing materially significant yet.

On the supply side, Lower 48 dry gas production has rebounded from freeze-offs, now exceeding 104 Bcf/d. January’s deep freeze helped pull gas inventories below the five-year average, improving the market’s fundamental outlook. However, we anticipate a well-balanced supply-demand dynamic throughout the year, keeping inventories on a steady trajectory. Given this balance, there’s little reason to lean significantly bullish or bearish on the current curve.

That said, weather remains the key wildcard. If unexpected cold snaps or production disruptions occur, the market’s outlook could shift. Additionally, supply growth throughout the year will dictate the storage path and influence price action.

We’ll dive deeper into the 2025 outlook and beyond in our next update.