Week Ending April 25

Crude ends week lower amid political turmoil, OPEC+ supply risks

The WTI prompt-month contract settled at $63.02/Bbl on Friday, posting a weekly loss. Crude markets remained volatile, driven by political uncertainty, macroeconomic concerns, and shifting supply-demand dynamics.

The week opened with heightened political turmoil in the US. President Trump’s public criticism of Federal Reserve Chair Jerome Powell and speculation over Powell’s potential removal rattled financial markets. The US dollar weakened to its lowest level since January 2024, compounding macroeconomic fears and weighing on overall sentiment.

OPEC+ supply dynamics remained a focal point. Kazakhstan declared it would be unable to meet OPEC+ production targets, citing national interests and foreign control of key oil projects. The country's production continued to exceed its quota, further undermining confidence in the alliance’s ability to manage supply. Supply concerns intensified amid reports that OPEC+ may raise production again in June.

In the Middle East, tentative progress in US-Iran nuclear negotiations raised the possibility of increased Iranian crude supply. However, sanctions enforcement remained active, with new penalties imposed on Chinese refiners for handling Iranian barrels, along with additional sanctions targeting Iran’s LPG exports.

On the trade front, President Trump softened his tone regarding tariffs on China, although Beijing pushed back, calling for the removal of all unilateral tariffs and denying any progress in bilateral talks. Concerns about slowing global demand persisted. Leading producer Matador Resources announced reductions in 2025 capital expenditures and drilling activity, citing the recent weakness in crude prices. The announcement underscores the sensitivity of US shale producers to price fluctuations.

Crude markets remain focused on US political risks, the potential for increased OPEC+ supply, and weaker global demand prospects. AEGIS maintains a neutral view on crude prices, with expectations for limited upside.

Natural gas falls below $3/MMbtu

Prompt month Henry Hub fell another 28c this week in the fourth consecutive weekly loss. This brings total losses over the past four weeks to more than $1, with prices settling at $2.97/MMbtu. Winter ‘25/’26 has also slid lower, settling at $4.27/MMbtu this week. This week’s decline in the next winter strip brings total losses to -96c from its peak in early March. Despite the weakness in the front of the curve, Winter ‘26/’27 has been more stable, settling at $4.30/MMbtu this week, only down 25c from the March high. Mild shoulder-season weather and relatively strong production have kept consistent pressure on prices.

While weather-driven demand started the year strong, March and April have disappointed. Population-weighted Lower 48 temperatures averaged 63.4 °F this week, and are forecast to remain between 62-64 °F for the next two weeks. This should result in very low levels of weather-driven gas demand and lead to large storage builds.

This week's reported storage build of 88 Bcf was larger than market participants expected, and put the deficit to the five-year average at -44 Bcf. The deficit has shrunk over the past several weeks, as it stood at -238 Bcf to the five-year average on February 28. It was this deficit, driven by large draws in January and February, that lifted prices across the curve. An early start to injection season has erased much of this, leading prices to moderate considerably.

While weather can take most of the blame for the looser S&D balance this spring, gas supply has been robust, further pressuring prices. Last weekend saw modeled Lower 48 production climb to an all-time high of 107.1 Bcf/d, according to S&P data. That marked the high point, with output falling throughout the week to just 104.85 Bcf/d on Friday.

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