The WTI prompt-month contract was higher early Friday, up $0.38 to $56.53/Bbl as of 7:45 AM CT
Geopolitical tensions remain elevated after Ukraine targeted a tanker linked to Russia’s shadow fleet in the Mediterranean, marking another attack on vessels supporting Moscow’s crude exports
Even with those risks in the background, market sentiment continues to be shaped by expectations of excess supply in early 2026
Major trading houses broadly expect prices to remain under pressure, with Trafigura forecasting Brent in the $50s through mid-2026 before a gradual recovery later in the year
“Oversupply concerns continue to dominate price formation, outweighing intermittent geopolitical disruptions,” said Haris Khurshid, CIO at Karobaar Capital LP
Trading volumes remain subdued ahead of the Christmas and New Year holidays, increasing the risk of uneven and choppy price action
Brent futures volumes were running below typical levels for the time of day on Friday
EIA revises OPEC crude production capacity estimates (EIA)
In its December Short-Term Energy Outlook, the EIA updated its definitions and estimates of OPEC crude oil production capacity, lifting capacity by an average of +0.22 MMb/d in 2024, +0.37 MMb/d in 2025, and +0.31 MMb/d in 2026, with a similar increase in estimated surplus capacity
The revisions reflect a refined definition of effective production capacity, the volume that can be brought online within 90 days and sustained without damaging reservoirs, rather than higher current output
Voluntary OPEC+ cuts are excluded from disruptions, meaning the higher effective and surplus capacity estimates reinforce the view that OPEC retains flexibility to offset supply risks, limiting upside price pressure
Natural gas heads for a second weekly loss
The January Henry Hub contract is trading below $4/MMbtu again, with gas prices heading for another weekly loss of about 20c
Yesterday, the EIA reported a -167 Bcf withdrawal from gas storage, which was smaller than the market expected but significantly larger than the five-year average withdrawal for the corresponding week
The storage surplus to the five-year average has now been shrunk to +32 Bcf, the smallest surplus since earlier this year
Lower-48 population-weighted weather forecasts shifted warmer overnight, with temperatures expected to be well-above average next week, reducing gas demand
Energy Transfer suspends development of Lake Charles LNG (Bloomberg)
ET announced they will suspend development of a planned LNG export facility in Southern Louisiana to focus on building pipelines
The project was supposed to reach a final investment decision in the near future, with startup likely around 2030
The company said they remain open to discussions with third parties about future development on the site, which has a pre-existing gas import terminal
Energy Transfer increases size of planned Southwest pipeline (Bloomberg)
ET will be increasing the size of the planned Desert Southwest pipeline expansion from 1.5 Bcf/d to 2.3 Bcf/d, and pipe diameter from 42-inches to 48-inches
The pipeline will ship gas from the Permian Basin to markets in Arizona and New Mexico
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