Natural Gas (Henry Hub)
Winter 25/26 - Bullish
Fundamentals
- While we remain bullish, we have seen a decline of 28% in Winter25/26 price since a peak on March 10 due to weak supply/demand fundamentals throuhgout Summer
- The rapid pace of storage injections continues as we have consistently built faster than the five-year average
- We project inventories will be roughly 3.9 Tcf, 100 Bcf above the five year average, as we enter withdrawal season
- A combination of milder weather, higher renewable generation and lower gas burns due to high prices are hastening inventory builds
- As Henry Hub prices dipped below $3.00, natural gas share of power stack increased helping to buoy price
- 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
- After peaking in late July/early August at 41, the Haynesville rig count has dropped to 39 leaving analysts estimating more rigs are needed to keep production growth in line with demand
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
Strategy
- Layer in protection on front of curve rallies (while we are bullish, price could be dragged lower before we get to these tenors)
- 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)
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
- An unexpected announcement to return further production in October 2025 caught the market off guard
- 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
- 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
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
