Week Ending November 7

OPEC+ taps the brakes on supply hikes as market eyes glut

The WTI prompt-month contract rose $0.32 to settle at $59.75/Bbl on Friday, rebounding after three consecutive days of losses. As the risk premium from Russian sanctions begins to fade, the market’s attention has shifted back to the looming supply glut expected in 2026.

Over the weekend, OPEC+ announced another 137 MBbl/d supply increase for December, matching recent modest hikes. However, the group also signaled a pause in output hikes for the first quarter, citing weaker seasonal demand and growing uncertainty around the supply outlook. This marks the first halt in supply restoration since April and reflects OPEC+’s cautious approach as the market braces for a potential glut. As RBC’s Helima Croft noted, the pause is a prudent move given the unpredictable landscape ahead.

Meanwhile, non-OPEC producers are ramping up output as well. Brazil’s Petrobras is accelerating production from the world’s largest deep-water field, aiming to boost dividends even as crude prices hover near five-year lows and the market braces for a glut. Output from the Buzios field off Rio de Janeiro reached 1 MMBbl/d last month after the sixth floating production unit hit capacity ahead of schedule.

Geopolitical risks continue to influence the market landscape. Ukrainian drone attacks have temporarily suspended operations at Russian refineries and damaged tankers in the Black Sea, underscoring the vulnerability of global supply chains. At the same time, US and EU sanctions have caused Russia’s seaborne crude shipments to plunge by the most since January 2024, as key buyers avoid Moscow’s barrels. Refiners in China, India, and Turkey are pausing purchases of sanctioned cargoes and seeking alternative sources, pushing Russian crude at sea to more than 380 MMBbls. Despite these disruptions, Gunvor CEO Torbjorn Tornqvist commented that Moscow has historically found ways to bypass sanctions and expects that disrupted barrels will eventually find buyers.

Given the uncertainty surrounding the impact of sanctions, the market outlook will depend on the material effects of these measures, compliance with OPEC+ output targets, and the potential for further supply disruptions. For now, AEGIS maintains a bearish outlook as oversupply risks persist.

December Henry Hub at multi-month high ahead of cold front

The prompt NYMEX Henry Hub contract has gained another 22c this week, extending gains from the last two weeks. The Summer ’26 seasonal strip moved higher by 4c, while Winter ‘26/’27 gained 3c. The strength at the front of the curve has primarily been driven by expectations of a significant boost to demand early next week, as a cold front impacts much of the Lower-48. In addition to weather-driven demand, LNG demand remains near record highs.

Next week should mark the coldest of the season so far, with temperatures set to plunge across the US. The Midwest and Northeast regions should be most impacted. Lower-48 residential and commercial demand is projected to reach 26.4 Bcf/d early next week compared to 22.5 Bcf/d today, according to data from S&P. While temperatures are forecast to drop below freezing for much of the eastern US on Monday and Tuesday, forecasts currently show a return to a warmer-than-average pattern after that. The demand boost may be enough to result in a net-withdrawal from Lower-48 gas storage, which would be the first of the winter 2025/2026 season.

In addition to stronger heating demand on the horizon, LNG feedgas demand has remained near record levels. This week, inflows to US export plants averaged 18.4 Bcf/d, which is the highest weekly average rate on record. This comes as Plaquemines LNG continues to make new records with inflows totaling more than 3.9 Bcf/d. Continued gains in LNG demand should help tighten market balances this winter.

Meanwhile a cargo of LNG is on route to Golden Pass to be used to cool down plant equipment ahead of the startup of Train 1. With the cargo set to arrive in the first week of December, this should put the facility on track to take material volumes around this Spring.

AEGIS anticipates a tightening of the supply-demand balance this winter, leading to a bullish skew for prices in 2026.