Week Ending July 11

Oil gains despite OPEC decison

Oil prices ended the week higher across the curve, with most of the gains coming on Friday as the August WTI contract rallied nearly 3% to settle at $68.45 per barrel. The rally came despite OPEC+ announcing on Saturday, July 5, that it would significantly increase production in August.

Analysts and traders had largely anticipated a sizeable production hike as part of OPEC+’s plan to gradually unwind the 2.2 million barrels per day of voluntarily withheld supply. Over the past three months, the group had been boosting output by about 411,000 barrels per day each month, well above the original target of around 140,000 barrels per day. The surprise this month was that OPEC+ announced an even larger increase of 548,000 barrels per day for August instead of maintaining the 411,000-barrel pace. Despite this, oil prices shrugged off the announcement on Monday and remained unfazed by the larger volumes.

Stepping back to broader fundamentals, the global oil market is still expected by most forecasters to be oversupplied over the next 18 months. Both the EIA and the Paris-based IEA published their monthly oil reports reflecting this ongoing glut. According to the EIA’s July Short-Term Energy Outlook (STEO), the global oil market is projected to be oversupplied by an average of 1.07 million barrels per day this year and 1.13 million barrels per day in 2026 - both higher than the agency’s June forecasts.

Despite the bearish outlook from analysts, oil prices have been resilient so far. The front of the WTI curve is holding close to $70, and the curve structure remains bullish, with backwardation (downward-sloping time spreads) extending through 2026. Low global oil inventories, especially in the U.S. and other OECD countries, are likely helping to support prices. Additionally, hard economic data—rather than sentiment surveys—has continued to surprise to the upside, helping to sustain demand relative to expectations.

On paper, however, the back half of 2025 and 2026 still appear well oversupplied, which is expected to weigh on prices over time. We remain officially neutral on the WTI curve as deferred prices continue to trade near $60 per barrel.

August Henry Hub settles lower for a third consecutive week

The front of the natural gas curve moved lower again this week, while prices further out advanced. The prompt month contract fell 12c to settle at $3.31/MMbtu, with this being the third straight week of losses. Meanwhile, the Winter ‘25/’26 seasonal strip gained 7c to finish at $4.39/MMbtu, and Summer ’26 rose 6c to settle at $4.16/MMbtu.

Expectations of continued bearish weather have kept the front of the natural gas curve weak. Lower-48 population weighted average temperatures are currently forecast to remain mostly below the ten-year average for the next two weeks. This should limit power sector natural gas demand and result in larger-than-average storage builds. Mild weather so far this year has already led to significant demand losses, and forecasts show this could continue. Power sector gas consumption has declined this year relative to 2024, with S&P data showing gas power demand from January through June 2025 averaging 32.47 Bcf/d compared to 33.69 Bcf/d last year over the same period. More wind and solar in addition to gas-to-coal switching has contributed as well.

However, LNG demand has been particularly strong. Inflows into US LNG export terminals rose to 16.4 Bcf/d this week, significantly higher year-over-year. Part of the strength in feedgas demand is due to higher flows into Cheniere’s Corpus Christi facility, as the Stage 3 expansion ramps up.

AEGIS holds a neutral view on near-term prices, and a bullish view on Winter ‘25/’26 and beyond.