Week Ending June 6

Crude climbs as trade optimism and robust US jobs data outweigh OPEC+ hike

Crude prices surged this week, with the WTI prompt-month contract rising $3.79 to settle at $64.58/Bbl, its highest close since early April. The rally was driven by a mix of geopolitical risk, unexpected supply disruptions, and encouraging macroeconomic data, which outweighed the impact of the latest OPEC+ supply increase.

OPEC+ announced a 411 MBbl/d production hike for July over the weekend, but the bearish supply headline was quickly overshadowed by a mix of geopolitical tension and physical supply disruptions. A Ukrainian drone strike deep inside Russia reintroduced a political risk premium, while wildfires in Alberta temporarily knocked out an estimated 350 MBbl/d of heavy crude output.

Further support came from improving US-China relations. Following a call between President Trump and President Xi, Trump announced a visit to China, with officials from both countries scheduled to meet in London on Monday for trade negotiations. Optimism around the talks helped lift risk sentiment. Crude also gained on Friday after stronger-than-expected US nonfarm payrolls eased concerns about an economic slowdown, lifting both equities and energy prices.

While Saudi Arabia signaled support for additional 411 MBbl/d increases in August and potentially September, market reaction suggests that near-term supply fears have moderated. HSBC now expects OPEC+ will proceed with a 411 MBbl/d increase in August and a 274 MBbl/d hike in September.

Despite this week’s rally, market fundamentals remain largely unchanged. OPEC+ appears committed to continued supply increases, and trade uncertainty persists. The WTI forward curve reflects this mixed outlook, backwardated through early 2026 but shifting into mild contango thereafter, suggesting the market expects near-term tightness to fade as supply rises. AEGIS maintains a neutral view.

Natural gas posts substantial gain despite continued storage looseness

The July Henry Hub contract advanced 33c this week to settle at $3.77/MMbtu, with much of the week’s gains coming form a 10c move on Friday. Winter ‘25/’26 gained 29c to settle at $4.67/MMbtu, while price action was more muted further out the curve. Summer ’26  rose by only 6c to $4.16/MMbtu. This week’s move came despite a further increase to the storage surplus and weakness in LNG feedgas demand.

The EIA reported the sixth consecutive 100+ Bcf storage injection this week, further elevating inventories above the five-year average. Gas storage is now 117 Bcf above the five-year average, but still lower than year-ago levels. The recent string of large builds is a result of weak weather-driven demand and relatively strong production, which has averaged about 105.5 Bcf/d this year. With the weather and demand outlook improving over the next two weeks, the pace of storage injections should slow somewhat. Our estimate for the amount of gas in storage at the end of injection season in November remains at 3.91 Tcf, assuming power burn is roughly flat to year ago levels on a weather adjusted basis, and that production reaches 108 Bcf/d by the end of the year. If production remains lower, around 106 Bcf/d, inventories may end the season closer to the five-year average at 3.73 Tcf.

LNG feedgas demand fell to the lowest level since January, at 14.34 Bcf/d. This drop was driven primarily by maintenance at multiple facilities. Cameron LNG has seen reduced flows for more than 30 days now, in a longer outage than previous years. Meanwhile, Sabine Pass LNG took Trains 3 and 4 offline, as maintenance occurs on the plant and the Creole Trail pipeline which supplies it. However, Plaquemines LNG hit a new record of 2.8 Bcf/d, following FERC approvals to flow more gas to their liquefaction blocks.

AEGIS continues to hold a neutral view on the balance of Summer ’25, and a bullish view on Winter ‘25/’26 and beyond.