Natural Gas (Henry Hub)
Summer 2025 - Neutral
Fundamentals
- The rapid pace of storage injections continues as we have consistently built faster than the five-year average
- Inventories now stand 174 Bcf over the 5-yr average
- A combination of milder weather, higher renewable generation and lower gas burns due to high prices are hastening inventory builds
- Plaquemines & Corpus Christi LNG expect to add nearly 4 Bcf/d of additional LNG demand by December 2025
- Golden Pass LNG has guided first feed gas in October; three months ahead of previous guidance
- The facility has taken its first gas, signaling the start up process is progressing
- Concern about supply meeting anticipated LNG demand growth by winter
- However, Haynesville has added 10 rigs since March, up to 40, but analysts estimate more rigs are needed to keep production growth in line with demand
Strategy
- Aggressively hedge on jumps in price
- We continue to recommend swaps over collars before supply/demand fundamentals become tighter this winter
Winter 25/26 Onward - Bullish
Fundamentals
- While we remain bullish, we have seen a decline of 31% in Winter25/26 price since a peak on March 10 due to weak supply/demand fundamentals throuhgout Summer
- LNG demand growth really starts to ramp in the 2H 2025 and continues to grow rapidly into 2027
- Current estimates are for nearly 20 Bcf/d of LNG demand by the start of 2027
- Permian supply will grow with new pipe in late '26 and '27, but more supply is likely needed
- Even after the recent oil volatility there remains concerns about furture crude production growth
- Associated gas supply isn't expected to change trajectory unless oil prices materially move lower from $60
- There becomes a "call on Haynesville" to bridge the gap between new LNG demand and supply
Strategy
- Layer in protection on front of curve rallies (while we are bullish, price could be dragged lower before we get to these tenors)
- By waiting you may be forced to hedge at lower prices before strip rallies
- Even though call skew has weakened take advantage of upside participation with option structures
Crude (WTI)
Bal 25 - Bearish
Fundamentals
- Price has retraced to the low $60.00s as sentiment is overwhelmingly bearish
- OPEC+ policy has changed to no longer act as the balancing item in the global oil market
- The group intends to hasten their supply unwind further with all 2.2 MMBbl/d of voluntary cuts to be unwound by the end of September 2025
- Voluntary cuts were originally scheduled to be unwound by 140 MBbl/d each month from April 2025 through September 2026
- These barrels come at a time when the market already looks oversupplied for 2025
- Expectations remain for supply to outpace demand in 2025
- In its latest monthly report EIA forecasts global oil balances will be oversupplied by 1.64 MMBbl/d
- However, inventories have been holding below the five year average so far this year on surprising strength in the physical market
Strategy
- Hedge into strength via swaps to protect as much cashflow as possible
Cal 26 - Bearish
Fundamentals
- Expectations of global oversupply persist throughout 2026, building upon the 2025
- The EIA's August STEO forecasts a global oil surplus of 1.45 MMBbl/d
- The formal OPEC+ policy to reduce production will remain in place even after the 2.2 MMBbl/d of voluntary cuts are unwound
Strategy
- Systematically add hedges when economically viable
- Utilize swaps to protect as much cashflow as possible
