Natural Gas (Henry Hub)
Winter 25/26 - Bullish
Fundamentals
- Tight supply/demand balance for the duration of winter is constructive for price assuming normal to cold weather
- Inventories have built to 3.96 Tcf, before withdrawal season officially starts in the next couple of reporting weeks
- We forecast a tight supply/demand balance drawing down to 1.75 Tcf at the end of withdrawal season
- Plaquemines & Corpus Christi LNG have added over 4 Bcf/d of additional LNG demand
- Golden Pass LNG has taken initial feedgas as it works toward start up
- Forecasts are for material feedgas volume by February 2026
Strategy
- Layer in protection on front of curve rallies
- Even though call skew has weakened take advantage of upside participation with option structures
Summer 2026 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 lower oil prices have reduced the liklihood of material future gas growth
- Even after the recent oil volatility there remains concerns about furture crude production growth
- There becomes a "call on Haynesville" to bridge the gap between new LNG demand and supply
- A lack of Haynesville activity could create a gap between supply and demand which could bolster price
- The ongoing bullish thesis starts with Winter 25/26 drawing down below the five-year average
- A warm winter and lack of material drawdown would drag futures prices lower ahead of the next slug of structural demand
Strategy
- Layer in protection on front of curve rallies
- Higher than normal call skew and a strong swap price mean collars can provide both a nice floor as well as upside participation
Crude (WTI)
Cal 26 - Bearish
Fundamentals
- Price has remained in the low $60.00s as sentiment is overwhelmingly bearish
- Curve structure has greatly weakened where backwardation exists in nearby contracts but flips to contango
- Recent sanctions on Russia put 1.5 MMBbl/d of supply into question
- Questions about Russian supply and various geopolitical risks have countered the bearish oversupply narrative in the short term
- OPEC+ policy has changed to no longer act as the balancing item in the global oil market as they bring millions of barrels back online
- Expectations remain for supply to outpace demand in 2026
- In its latest monthly report EIA forecasts global oil balances will be oversupplied by 2.17 MMBbl/d
- OECD inventories have been holding below the five year average so far this year on surprising strength in the physical market
- However, inventory builds have been increasing 'on the water' as well as in Non-OECD countries
- China has been a major buyer throughout 2025, building inventory at a quicker than normal pace
Strategy
- Hedge into strength via swaps to protect as much cashflow as possible
Cal 27 - Bearish
Fundamentals
- The state of Cal 27 for oil largely depends on how the oversupply narrative unfolds throughout 2026
- Bearish price forecasts due to oversupply has reduced non-OPEC+ supply projections
- It is possible that by 2027 and 2028 growth from non-OPEC+ countries could be minimal to negative
- Combine this with OPEC bringing back a large quantity of spare capacity, the oil market could find itself relatively tight in the physical market
- This means prices would need to rise against the current curve
Strategy
- Systematically add hedges when economically viable
- Utilize swaps to protect as much cashflow as possible or collars if able to tolerate a lower floor price
