Oil Climbs on Middle East Risks; Mild Weather Weighs on Gas

Crude advances as Middle East tensions escalate

• The WTI prompt-month contract rose $2.60 to $99.75/Bbl Thursday morning (8:07 AM CT)
• The Cal 2027 and Cal 2028 strips traded above $87/Bbl and $77/Bbl Thursday morning, respectively
• The US ordered non-emergency government employees and their family members to leave its missions in Saudi Arabia following a series of Houthi attacks on civilian and energy infrastructure
• Regional shipping risks continue to intensify, with UKMTO figures showing 32 reported incidents since October 10
• The threat has expanded beyond the Strait of Hormuz into the Gulf of Oman, placing additional pressure on the STS operations that have helped sustain Middle Eastern exports
• • Morgan Stanley initially estimated that Middle Eastern crude exports, including volumes shipped through alternative routes, averaged roughly 17 MMBbl/d last week, or approximately 94% of the region’s 18 MMBbl/d prewar average
  • The bank estimated that Saudi Red Sea loadings reached 3 MMBbl/d as the East-West pipeline continued operating, with roughly 75% of those volumes moving north toward the Mediterranean
• Iranian Foreign Minister Abbas Araghchi said Tehran was prepared to give diplomacy another chance if Washington demonstrated a sincere willingness to build trust and reach an agreement
• • The statement offered a potential diplomatic opening, although the two sides remain far apart over Iran’s conditions and US demands

Natural gas trades slightly higher, after yesterday’s substantial decline

• The November Henry Hub contract fell 17c yesterday, while prices across the curve also declined sharply
• The Winter ‘26/’27 seasonal strip fell to $3.08/MMBtu yesterday, a new year-to-date low
• Lower-48 population-weighted average temperatures are forecast to be mostly above the ten-year average for the next two weeks, suppressing gas demand
• The EIA will release its weekly natural gas storage report today, with a median expectation of a 78 Bcf build
• • This could be the tenth consecutive build which is smaller than the five-year average

NGPL reaches FID on Permian Link project

• NGPL made a final investment decision on the 434-mile greenfield system, which will ship up to 2.8 bcf/d from Pecos County to the Texas panhandle
• The purpose of the project is to serve growing power demand in the panhandle from data center projects
• The project is expected to enter service in 2030, and will allow more Permian gas to move north into NGPL’s Midcontinent zone and to storage in Oklahoma
• Kinder Morgan pushed back on the idea of a potential overbuild of pipeline capacity out of the Permian, saying their projects are driven by end user demand rather than producers