Week Ending March 21

WTI logs back-to-back weekly gains as market weighs trade, geopolitics, and OPEC+ supply

WTI crude settled slightly higher on Friday, rising 2c to close at $68.28/Bbl. Despite persistent concerns over trade wars weighing on demand growth and ample supply levels, WTI managed to notch a weekly gain.

Geopolitical tensions also resurfaced early in the week, adding volatility to the market. President Trump authorized military strikes on Houthi militia sites in Yemen in response to attacks on vessels navigating the Suez Canal and the southern Red Sea. The strikes served as a reminder of the geopolitical risk premium, which had largely faded in recent months. Tensions escalated further as Israel resumed military operations in Gaza, ending a nearly two-month ceasefire. Additionally, President Trump issued a stern warning to Iran, threatening further retaliation if Houthi attacks persisted.

In Asia, China unveiled a “special action plan” aimed at stimulating domestic consumption. The initiative comes amid sluggish consumer spending, which remains weak following the country’s protracted recovery from COVID-19 disruptions and continued challenges in its property sector. Facing mounting pressure to support household demand, Chinese officials are pivoting toward consumer-focused stimulus measures to counter deflationary pressures and reduce the economy’s reliance on exports and investment-driven growth. Meanwhile, the US escalated its sanctions campaign in Asia, targeting a Chinese oil refinery and terminal operator for importing Iranian crude. This marks the first instance of Washington directly sanctioning entities within China’s refining sector as part of its broader strategy to pressure Tehran.

On the supply front, the American Petroleum Institute (API) reported a 4.6 MMBbl build in U.S. crude inventories for the week ending March 14. However, the Energy Information Administration (EIA) reported a smaller-than-expected increase of 1.8 MMBbl, offering some support to prices. In monetary policy, the Federal Reserve announced its decision to keep interest rates unchanged. Fed Chair Jerome Powell downplayed concerns about potential economic drag from U.S. trade policies, suggesting that any inflationary effects from tariffs would likely prove transitory.

Nevertheless, the week’s gains were capped by the looming prospect of additional OPEC+ supply set to come online next month. Several member countries, including Kazakhstan, Iraq, and Russia, have pledged further cutbacks to offset previous overproduction. These reductions, in theory, will balance plans to revive halted output through the end of next year.

Against this backdrop, AEGIS maintains a neutral stance on prices, projecting limited upside in the near term.

Natural gas heads for second weekly loss, while the EIA reports the first injection of 2025

Prompt month Henry Hub settled 12c lower at $3.98/MMbtu this week, bringing the total losses over the last two weeks to -45c. The Winter ‘25/’26 strip finished the week down 8c at $4.98/MMbtu, and Summer ’26 settled 8c lower at $4.09/MMbtu. This week marked the first storage injection of 2025, several regulatory updates, and new records in Texas solar generation.

The EIA reported an injection of 9 Bcf on Thursday. This was larger than the median estimate, according to a Bloomberg survey of analysts. This is the earliest start to the injection season in at least the last five years, although in 2024, a storage build was reported for the same week, two more withdrawals were reported the weeks after. This week’s injection put US inventories 190 Bcf below the five-year average.

Several regulatory changes and FERC approvals or rulings were announced this week, with the new administration aiming to streamline the regulatory process.

• The EPA will reevaluate a Biden-era ruling designed to limit CO2 emissions from coal power plants, with a potential reversal possibly improving the economics of coal plants.
• Venture Global received approval to export LNG from the planned CP2 export project, which was one of the facilities affected by the Biden administration's LNG pause.
• The Trump administration repealed an EPA rule that would have imposed a $ 1,500/mt fee on methane leaks, which many US producers had been critical of.
• FERC will be scaling back scrutiny of LNG export plants, specifically relating to projects in Texas, which developers hope will lead to canceled projects being revived.

In addition to these items, new records were set in the ERCOT market, with solar generation rising to a record high of 26.32 GW. Solar generation across the US is expected to continue rising as seasonal factors lead to higher capacity utilization and more projects are installed. The continued buildout of solar, wind, and battery threatens gas power generation. This is especially true during peak summer, when new solar and battery projects may displace less-efficient natural gas peaker plants from the power mix.

AEGIS generally recommends clients hedge with swaps in the summer months and costless collars in winter. The recent rise in call skew in both winter and summer months may make costless collars more attractive, even in summer months. Reach out to your AEGIS strategist to discuss this further.