Geopolitics Lift Oil to Multi-Month High; Natural Gas Sinks Back Toward Recent Lows

Oil Advances on Iran Threats of Potential Strike

• The WTI prompt-month contract rose $0.78 to $61.93/Bbl on Wednesday morning (7:45 AM CT), reaching the highest level since October
• Prices are climbing as traders monitor the US response to escalating political turmoil in Iran
• • Some US personnel have been advised to leave an airbase in Qatar (Bloomberg).
  • The National Security Council met with President Trump on Tuesday to outline response options (Washington Post)
• The potential for conflict has boosted geopolitical premiums given Iran’s ~3.3 MMBbl/d of crude output
• The American Petroleum Institute reported a 5.3 MMBbl crude build last week; official EIA data will be released later today

European Oil Market Strengthens on Barrel Shortage (Bloomberg)

• The oil market in Europe is strengthening sharply due to reduced shipments from Kazakhstan as well as Libya and North Sea fields, tightening supply
• Reduced flows of certain crude grades have pushed up physical prices in the North Sea and Mediterranean, with some grades reaching one-year highs
• The forwards curve of North Sea swaps is in backwardation, suggesting near term supply is tight

Natural gas reverses gains, as selloff resumes

• The February Henry Hub contract is down more than 20c this morning, trading near recent lows (8:15 AM)
• The near-term demand outlook has improved slightly this week, with temperatures forecast to be slightly below the ten-year average for much of the next two weeks

EIA cuts Henry Hub forecast (NGI)

• EIA has revised its natural gas price outlook, predicting lower prices this winter due to mild weather
• Price strength is expected to return in 2027 with rising LNG exports
• The EIA forecasts Henry Hub prices to average $3.56/MMbtu for this winter, down from $4.30/MMbtu, and $4.59/MMbtu for 2027

Waha basis prices remain weak (S&P)

• According to Platts data, cash prices in West Texas have been consistently below zero this month
• The weakness comes despite an improvement in egress capacity, after the 500 MMcf/d Matterhorn Express expansion started flowing gas in Q4 2025
• Low demand is likely contributing to the price weakness