Oil Rallies Near Multi-Month High on Iran Risk; Gas Weakens into Shoulder Season as Production Slips

Oil nears seven-month high

• The WTI prompt-month contract climbed $0.71 to $67.02/Bbl as of Tuesday morning (7:30 AM CT)
• President Trump dismissed suggestions that the Pentagon is wary of a prolonged conflict with Iran, reiterating that a negotiated agreement remains his preferred outcome
• US and Iranian officials are scheduled to resume talks Thursday, with Trump’s special envoy traveling to Geneva for discussions with Iranian Foreign Minister Abbas Araghchi
• Polymarket pricing currently implies a 62% probability of a US strike on Iran before the end of March
• Escalating geopolitical risk, combined with earlier supply interruptions this year, has eased concerns that a significant surplus would weigh on prices heading into 2026
• • Diamondback CEO Kaes Van’t Hof echoed that sentiment, noting that concerns over a looming crude glut have so far failed to materialize and appear to be diminishing
  • However, the EIA’s forward balance still implies an average 3.1 MMBbl/d surplus in 2026, according to the latest Short Term Energy Outlook

Natural gas trades lower, with March below $3/MMBtu

• Outside of a cold front early next week, Lower-48 population-weighted average temperatures are mostly forecast to be around the ten-year average
• • Demand should continue to trend lower as the shoulder season approaches
• Dry gas production has turned lower in recent days, with output at 107.3 Bcf/d this morning, compared to 109.5 Bcf/d last week
• Golden Pass LNG continues taking gas, with inflows at 178 MMcf/d this morning, and 297 MMcf/d yesterday
• • Train 1 will continue to startup over the next month, rising to 790 MMcf/d, while Trains 2 and 3 start up later this year

DT Midstream raises project backlog amid Midwest demand wave (NGI)

• Surging gas demand in the Upper Midwest has led DT Midstream to increase its five-year project backlog by 50% and sanction two new expansion projects
• The company sees up to 13 Bcf/d of new gas demand in the Midwest over the next decade, with a more realistic path being 5-8 Bcf/d
• Coal retirements and data center construction are expected to drive most of the demand gains
• There have been several pipeline expansions announced for the Midwest region over the past year, as developers look to expand supply around the Chicago area and into Wisconsin