Week Ending February 21

WTI slides into a weekly loss on Friday’s drop in oil prices.

WTI prices dropped 3% on Friday, settling at $70.40/Bbl. The day’s drop of $2.08 marks a weekly loss for oil prices. The downturn in oil prices seems to mirror broader market weakness, as stocks were also hit on the same day, falling nearly 2% due to weaker-than-expected economic data. The overall risk-off sentiment in the financial markets likely affected oil prices, reflecting investor caution across multiple asset classes, rather than any specific event in the commodities market.

As investors assess broader economic concerns, oil traders are closely monitoring OPEC+ production plans, which are expected to be delayed once again. This would mark the fourth time the alliance has postponed its strategy to bring back oil production, which was initially set to increase by 120 MBbl/d starting in April. The goal is to restore a total of 2.2 MBbl/d in production, halted back in 2022. Soft oil demand growth in China, coupled with the potential impact of President Trump's trade tariffs, has led the group to reconsider. Analysts suggest that OPEC+ is willing to forgo further market share to keep prices from dipping below the $70-$74 range, signaling their intention to prioritize price stability over production growth.

As OPEC+ deliberates on its next move, the market is also grappling with unexpected disruptions on the supply side. Earlier this week, a Ukrainian drone strike targeted the 940-mile Caspian Pipeline Consortium (CPC), which exports oil from Kazakhstan to Russia's Black Sea port of Novorossiysk. The CPC is a critical pipeline for Kazakhstan's oil exports, accounting for about 80% of the country’s total output, transporting 1.5 MBbl/d. On Tuesday, Russian Deputy Prime Minister Alexander Novak said the strike reduced oil flows through the CPC by 30%-40%. A 30% reduction translates to the loss of 380 MBbl/d of oil supply to the market. With repairs possibly taking months, traders are looking for more clarity regarding the pipeline’s operational status.

This disruption adds further complexity to an already volatile market. AEGIS has adopted a neutral stance on oil prices, which remain near $70, as questions about the impact of Trump’s tariffs on global demand continue to linger.

March Henry Hub settles at the highest level since 2023.

It was a particularly volatile week for natural gas prices, with the prompt month advancing 50c and trading as high as $4.50/MMbtu intraday. The March contract settled off the week's highs at $4.23/MMbtu. The rest of the curve traded higher, with Summer ’25 up 36c to $4.32/MMbtu and Winter ‘25/’26 now at $4.71/MMbtu. While weather forecasts drove much of the price action this week, LNG feedgas demand pushed to a record high, helping to support price.

This week, temperatures fell to some of the lowest levels of the season, boosting heating and power demand and likely leading to a sizeable withdrawal from storage. The market has seemingly been focused on how the end of winter will shape up and whether below-average temperatures will continue into March. This week should result in a sizeable 200+ Bcf withdrawal from storage, to be reported by the EIA next week. With US gas inventories already -118 Bcf below the five-year average, next week’s storage report should see the deficit expand further. With inventories set to end winter (in about a month) well below the five-year average, this has lifted prices across the curve. However, higher prices have already led to weaker power burn numbers relative to coal. Natural gas occupied about 65% of the coal+gas mix this week, compared to the 70-75% seen on average in 2024 when prices were much lower. If prices remain high in summer, it could reduce gas demand.

Meanwhile, LNG feedgas demand continued to push higher, further tightening the market. According to data from S&P, gas flow to LNG export facilities reached 16.84 Bcf/d as Plaquemines LNG continues ramping, now at 1.6 Bcf/d. Cheniere reported that the Corpus Christi Stage 3 expansion had produced its first cargo, following the first LNG production in December. Higher demand from LNG facilities is expected to be the primary driver of gas demand growth in 2025, with Corpus Christi Stage 3 beginning to ramp up production.

AEGIS continues to hold a neutral outlook on Summer ’25 prices and a bullish view on Winter ‘25/’26 and beyond.