Natural Gas (Henry Hub)
Summer 2025 - Neutral
Fundamentals
- The rapid pace of storage injections has erased the large deficit to the 5-yr average observed at the end of 1Q
- Warmer March and April weather, along with strong production, has pushed inventories back above the 5-yr average
- The June '25 contract peaked in mid-March at $4.69 before starting a relatively steady move lower
- Plaquemines & Corpus Christi LNG expect to add nearly 4 Bcf/d of additional LNG demand by December 2025
- Concern about supply meeting anticipated LNG demand growth by winter
Strategy
- Aggressively hedge on jumps in price
- With gas prices for Summer 2025 in the mid $3.00s, we recommend swaps over collars
Winter 25/26 Onward - Bullish
Fundamentals
- 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
- Oil prices have recently fallen, causing concerns about furture crude production growth
- However, 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
- Take advantage of call skew with option structures
Crude (WTI)
Bal 25 - Neutral
Fundamentals
- Oil prices are back above $60/Bbl after the US and China agreed to some terms and a 90-day pause on extreme tariff measures
- Trump's use of tariffs and ensuing trade war has caused downward revisions to global demand
- His rhetoric favors a lower oil price in the face of sanctions to Iran and Russia
- Supply is forecasted to outpace demand in 2025
- Latest demand forecasts are between 700 MBbl/d and 1 MMBbl/d of growth - much lower than a month ago
- OPEC+ has begun bringing back voluntary production cuts as of April (2.2 MMBbl/d of voluntary cuts)
- Voluntary cuts are scheduled to be unwound by 140 MBbl/d each month from April 2025 through September 2026
- OPEC+ recently announced an increased amount of volume for May and June 2025 of 400 MBbl/d
- These barrels come at a time when the market already looks oversupplied for 2025
Strategy
- Hedge into strength via swaps to protect as much cashflow as possible
- While we remain offically neutral, we do see more downside price risk than updside
Cal 26 - Neutral
Fundamentals
- Modest global demand growth moving forward could be hampered by a trade war
- Many forecast 2026 to be more oversupplied than 2025
- OPEC spare capacity is estimated to remain near 6 MMBbl/d
Strategy
- Systematically add hedges when economically viable
