Week Ending August 22

Price Pressure for Oil Is Looking One Sided

AEGIS is officially shifting its crude oil view to bearish versus the forward curve. At this stage, we find it difficult to make a rational case for prices to materially move higher and see greater probabilities that spot WTI prices settle below the curve.

The shift in our view shouldn’t come as a surprise for those who have heard our rhetoric recently. In our recent webcast, we hammered on the growing forecasted supply glut expected in the global oil market. This commentary carried plenty of bearish undertones despite officially sticking with a neutral view on the curve. That has changed as a rapid rise in global oil inventories may be just around the corner.

Unlike some other agencies and analysts, we are relatively late in formally adopting a bearish narrative. As of today, we join the broader consensus expecting weaker prices over the next 18 months. Read here for how not bullish speculators are on WTI crude. The most recent EIA price forecast, shown below, reinforces this view.

We shifted our view from bullish to neutral vs the curve on September 27, 2024, via our Market Summary that goes out to clients every Friday. Below is a graphic of the day we went neutral up until today August 21. Typically, looking back at how your price calls faired is quite humbling as many events happen outside what you are able to forecast, even if you have the perfect mousetrap. Yet, we didn’t fare too bad this time as WTI was mostly range bound over the past year while providing producers with some opportunities to catch price spikes.

The chart compares the WTI forward curve from our September 27, 2024 outlook (purple) with the curve as of August 21, 2025 (dark blue), the date we shifted to a bearish view. Between these two points, the chart also tracks how various maturities on the curve traded over time. For instance, the red line represents the monthly average price of the 24th month on the WTI curve. Highlighting multiple points along the curve provides a clearer picture of what producer hedgers monitor, rather than relying solely on the more volatile prompt-month contract.

In conclusion, we held on to neutrality for as long as possible—we dislike sitting in the middle, as it often feels like a copout. But with the projected degree of oversupply, we expect the WTI forward curve to give up its backwardation and transition into a modest contango if forecasts prove accurate.

September Henry Hub falls to multi-year low

The prompt September natural gas contract lost 21c this week, to finish at $2.70/MMbtu. This is the lowest level the September contract has traded at since 2021. The rest of the forward curve also moved lower, with Winter ‘25/’26 down 16c to $3.67/MMbtu, and Summer ’26 down 5c to $3.66. Weather forecasts showing below-average temperatures for the next two weeks have weighed on prices.

Lower-48 population weighted average temperatures are forecast to be well below the ten-year average for the next two weeks. This should result in materially weaker gas demand and higher storage builds, a trend already observed throughout summer 2025. This month has been one of the coolest Augusts of the past 25 years and the most recent two-week forecasts show this pattern continuing into the start of September. This should result in gas demand dropping to the lowest level since spring.

While weather-driven demand has been and continues to be weak, total gas demand has been modestly higher this summer compared to last summer, by 1.28 Bcf/d. This net year-over-year increase has been driven by higher LNG feedgas demand. However, gas production has remained quite strong throughout summer 2025, averaging 107 Bcf/d this month and 106.5 Bcf/d in July, according to data from S&P.

Based on our modeling, we continue to expect high storage levels to start winter, near 3.95 Tcf. However, assuming ten-year normal weather, inventories are anticipated to draw down below the five-year average by the end of winter, primarily due to continued increases in LNG demand.

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.