Week Ending April 11

Crude slides for second consecutive week as trade war with China escalates

WTI prompt-month contract settled at $61.50/Bbl on Friday. Despite posting a daily gain, it marked the second consecutive weekly decline. WTI has now fallen roughly 14% in April as volatility rises and the market pivots decisively toward a bearish outlook. Key indicators throughout the week pointed to a softening global supply-demand balance.

The most significant drag on crude this week was the sharp escalation in trade tensions between the US and China. On Wednesday, the US enacted a 125% tariff on Chinese imports, triggering a swift response from Beijing, which raised its tariffs on US goods from 34% to 125%, effective April 12. These retaliatory measures have added significant macroeconomic uncertainty and dampened global risk appetite.

Weakening demand fundamentals exerted further downward pressure on oil prices. The EIA revised its global crude demand forecast lower by 400 MBbl/d for 2025, citing persistent macroeconomic uncertainty. The announcement reinforced concerns that oil markets are heading into a period of oversupply, especially as OPEC+ prepares to add over 400 MBbl/d of production starting next month.

Market structure also shifted notably this week, as the WTI forward curve moved into contango from 2026 through 2030. With the front-month WTI contract trading between $55 and $60/Bbl during the week, attention turned towards potential production curtailments from US shale producers.

The re-emergence of a full-scale trade war between the US and China, combined with weakening demand forecasts and a deteriorating forward curve, has weighed heavily on crude’s fundamental outlook. AEGIS holds a neutral view on prices, but until geopolitical tensions ease and demand stabilizes, the risk remains skewed to the downside.

Extreme intraday volatility and new LNG records

The prompt month contract settled 30c lower at $3.54/MMBtu, bringing total losses over the last two weeks to 41c. Winter '25/’26 fell 28c to finish the week at $4.44/MMBtu, while Summer ’26 settled 6c higher at $4.16/MMBtu. Despite Henry Hub being far more insulated to trade war driven market moves, natural gas got caught up in the volatility regardless. Meanwhile, LNG feedgas demand hit a new record.

Fundamentally, the recent tariffs and trade actions should have a relatively limited impact on US natural gas prices. However, prompt gas posted a gain of more than 30c directly after the announcement of a 90-day tariff pause, in alignment with crude, equities, and other risk assets. Prices subsequently traded lower.

Meanwhile, US LNG feedgas demand quietly hit a new record high of 17.73 Bcf/d. This new record was driven by Plaquemines LNG reaching about 2.5 Bcf/d for the first time, while other facilities are operating near their maximum capacity levels. While LNG flows should decline over the next month into summer as temperatures warm up, work on Plaquemines and Corpus Christi Stage Three will continue, with total US LNG capacity continuing to climb and likely ending 2025 around 18 Bcf/d, and possibly higher depending on the pace of Exxon’s GoldenPass LNG startup. The recent strength in LNG exports has prompted the EIA to boost its LNG export forecast for 2025 by 7% to 15.2 Bcf/d on average.

AEGIS recommends hedging with swaps for near-term contracts, costless collars for Winter ‘25/’26, and either swaps or tight collars for Summer ’26.