Oil Steadies Ahead of US-Iran Talks; Gas Firms on Weather

Oil steadies as market looks ahead to US–Iran talks

• The WTI prompt-month contract edged up $0.07 to $63.28/Bbl as of Wednesday morning (7:30 AM CT)
• Indirect negotiations between Iranian Foreign Minister Abbas Araghchi and US envoy Steve Witkoff are set to take place in Oman on Friday
• • Iran’s semi-official Tasnim news agency said discussions would be “limited to the nuclear issue and the lifting of sanctions”
  • The planned talks follow a US move earlier this week to shoot down an Iranian drone
• While major agencies and banks continue to flag an oversupplied outlook, prices are finding support from geopolitical risk tied to a potential conflict in the Middle East, a region that produces roughly a third of global crude
• Separately, the American Petroleum Institute reported US crude inventories fell by 11.1 MMBbls last week
• • If confirmed by EIA data later Wednesday, the draw would mark the largest weekly decline since June

Morgan Stanley lifts near-term oil outlook

• The bank raised its short-term price forecast while maintaining its view that global supply will outpace demand over the course of the year
• Morgan Stanley now sees Brent averaging $62.50/Bbl in 1Q, up from a prior $57.50/Bbl forecast, citing expectations that “the geopolitical risk premium is likely to persist for a period”

Prompt-month natural gas is up 6.3c to $3.374/MMbtu (07:30 AM CDT)

• Weather forecast shifts were mixed, resulting in Lower 48 temperature changes being a near-flat 0.8°F gain over the 1-15 day forecast period
• • While the Northeast and Southeast regions got 9.4°F and 7.7°F colder respectively in the 11-15 day forecast period, they were offset by forecasted temperature gains in the West, Rockies, and South Central
  • HDDs are still above normal, but are expected to fall below the 10 YR Average in the middle of next week
• Production gains from the prior day of 200 MMcf/d to 109.7 Bcf/d were primarily centered in small gains in the South Central region

Transco’s 1.6 Bcf/d Southeast Enhancement gas project gains FERC Approval (S&P)

• FERC unanimously approved the order, citing the clear need for the project
• With FERC approval being granted on January 29th, it’s expected to remain on schedule to start within the seasonal construction window before April 1st
• The project is expected to provide partial service in time for the 2026-27 winter heating season

Golden Pass LNG is expected to begin production in early March (S&P)

• S&P Global analysts expect Golden Pass to export its first LNG cargo in April, based on low feedgas deliveries to the terminal in January
• Golden Pass is expected to reach full commercial service in 2027, which would then give it a feedgas demand of around 2.5 Bcf/d