Week Ending October 31

Geopolitical risks and sanctions support crude prices despite bearish fundamentals

WTI crude prices floated near $60/Bbl after last week’s rally following the sanctions on Russian state-owned crude exporters Rosneft and Lukoil. Despite persistent concerns about oversupply, renewed geopolitical risks helped keep crude from sliding lower, with the prompt-month contract settling at $60.98 on Friday.

OPEC+ is set to meet over the weekend to discuss production output for the month of December. The group is widely expected to approve another production hike of roughly 137 MBbl/d, matching the previous two monthly increases and bringing total supply increases to nearly 2.9 MMBbl/d since April. Internal discussions remain focused on balancing quota hikes with the risk of further oversupply, especially as non-OPEC output continues to outpace demand growth.

On the domestic front, US crude production continued to edge higher, reaching a new peak above 13.6 MMBbl/d. This came despite the EIA reporting a 6.9 MMBbl draw, far exceeding market expectations. The decline was driven by a sharp drop in Gulf Coast inventories as regional imports hit a record low. Gasoline stocks also tumbled to their lowest since last November, reflecting reduced refinery runs and rising demand, with operational issues at BP’s Whiting plant contributing to a particularly steep draw in the Midwest.

Meanwhile, the impact of sanctions on Russian oil remains uncertain. India’s state-run refiners stated they are actively exploring ways to maintain purchases of discounted Russian crude by working with non-sanctioned suppliers, while also preparing for a scenario where Russian exports are significantly curtailed. Indian Oil Corporation is seeking up to 24 million barrels from the Americas to offset potential shortfalls. At the same time, volumes of Russian, Iranian, and Venezuelan oil at sea reached a record high according to Vortexa, possibly suggesting that the new sanctions are beginning to slow flows and create supply chain bottlenecks.

Geopolitical tensions intensified on Friday, as oil climbed following reports that the US may target Venezuelan military sites. However, prices quickly faded after President Trump pushed back on the report. The market’s reaction to these conflicting signals underscores heightened sensitivity to geopolitical headlines, as traders remain focused on any developments that could disrupt global supply flows.

While fundamentals point to persistent oversupply, geopolitical volatility and shifting trade flows remain key drivers of market sentiment. For producers and traders, the current environment offers opportunities to manage price exposure, but any sustained strength will depend on the material impact of sanctions and the ability of exporters to reroute displaced barrels. AEGIS maintains a bearish view.

Natural gas heads for another weekly gain, with December trading above $4/MMbtu

The November Henry Hub contract expired this week, making December the new prompt month contract. December traded higher, settling at $4.04/MMbtu, after being below $4 for most of this week. Forward prices moved higher, especially the bal Winter ‘25/’26 strip which gained 16c to settle at $4.02/MMbtu. Summer ’26 advanced by 3c to settle at $3.88/MMbtu.

Last week, gas prices jumped as weather forecasts began showing below-average temperatures for the remainder of October and into November. While forecasts moderated somewhat this week, Lower-48 population-weighted temperatures are still projected to remain below average for much of the two-week forecast period. The latest Euro Ensemble model shows temperatures consistently around 55 ºF through November 14, although the ten-year average drops from about 60 ºF to nearly 50 ºF. Storage withdrawals should begin once Lower-48 average temperatures cross below the 50 ºF level.

This week’s EIA inventory report showed the storage surplus to the five-year average expanded for a second week, rising to +171 Bcf. The storage surplus/deficit has been little changed since June, with inventories between 150 and 200 Bcf above the five-year average. However, once peak winter sets in, this surplus should flip to a deficit.

Meanwhile, LNG feedgas demand continued to make new records this week. Inflows to export plants reached a high of 19.07 Bcf/d on Friday, according to data from S&P. Cooler temperatures along the Gulf Coast have allowed several facilities to reach their max capacity, while Plaquemines LNG continues to ramp up. Plaquemines LNG received a maximum rate of 3.8 Bcf/d this week but could take as much as 4.1 Bcf/d once all on-site power generation is installed. Golden Pass LNG is still taking about 8 MMcf/d but should ramp up over the coming months.