Week Ending August 15

WTI drops to lowest since June ahead of US–Russia summit

Crude oil prices extended their slide on Friday, with the WTI prompt-month contract settling $1.16 lower at $62.80/Bbl, the lowest close since June 2. The decline came ahead of a pivotal US–Russia summit in Anchorage, Alaska, where Presidents Donald Trump and Russian President Vladimir Putin are expected to discuss a potential ceasefire in Ukraine. An agreement could pave the way for easing US sanctions on Russian crude exports, adding barrels to an already oversupplied market.

OPEC+ is set to implement its final tranche of production hikes on September 1, adding another 548 MBbl/d as part of the group’s accelerated return of 2.2 MMBbl/d of curtailed output. At the same time, the demand outlook has weakened. China, the world’s largest crude importer, reported softer-than-expected July industrial production, retail sales, and fixed-asset investment. The slowdown adds to concerns that the global economy is losing momentum, further eroding demand growth expectations.

Against this backdrop, the EIA’s latest Short-Term Energy Outlook (STEO) reinforced the bearish tilt in market sentiment. The agency cut its WTI price forecast for 2025 by $1.64 to $63.58/Bbl and for 2026 by $7.05 to $47.77/Bbl, citing expectations for sizable OECD inventory builds. Commercial stocks are now projected to rise by more than 2 MMBbl/d in 4Q25 and 1 MMBbl/d in 1Q26, roughly 0.8 MMBbl/d higher than last month’s forecast. While the EIA expects weaker prices in early 2026 to prompt output cuts, those reductions are not anticipated until later in the year, slowing stock builds only in the second half of 2026.

In the near term, prices remain under pressure from the combination of rising supply, swelling inventories, and softening macroeconomic indicators. While production pullbacks in late 2026 could slow stock builds, the prevailing outlook points to a market dominated by excess supply and constrained demand, with geopolitical developments serving as the primary driver of short-term volatility. AEGIS maintains a neutral view with a bias to the downside.

Gas posts fourth weekly drop as storage surplus expands

Prompt month gas moved lower by 5c this week to settle at $2.94/MMbtu, as near-term prices remain weak. The rest of the curve also remained under pressure, with Winter ‘24/’25 falling 11c to $3.84/MMbtu, and Summer ’26 losing 2c to finish the week at $3.72/MMbtu. Strong storage builds continued, with EIA data showing the surplus to the five-year average reaching the highest level since January.

The EIA reported an injection of 56 Bcf for the week ending August 8, which pushed the storage surplus to the five-year average higher. The surplus shrank last week on a small 7 Bcf injection, but this week it reached 196 bcf above the five-year average, the highest level since the first week of 2025. This continues the summer 2025 trend of larger injections.

According to S&P data, 10.12 Bcf/d has been injected on average this summer, compared to the summer 2024 average of 7.61 Bcf/d and 9.12 Bcf/d in summer 2023. While power sector demand being lower this year has contributed to this, overall demand is slightly higher year-over-year. The biggest change in year-over-year market balances has come from supply. Lower-48 gas production is up 4.49 Bcf/d to average 106.39 Bcf/d, compared to the summer 2024 average of 101.90 Bcf/d.

Our projections, which assume ten-year average weather beyond the next two weeks, show storage climbing to 3.94 Tcf by the end of the injection season. Despite this, our projections show strong LNG demand leading to a drawdown in inventories below the five-year average by the start of summer 2026.

AEGIS holds a neutral view on near-term prices and a bullish view on Winter ‘25/’26 and beyond. Swaps are recommended in the summer months, while costless collars may be preferred in the winter.