Week Ending November 14

Oil rises on geopolitical tensions, but EIA projects bearish outlook through 2026

Crude oil prices finished higher on Friday, with the WTI prompt-month contract settling at $60.09/Bbl, up $1.40 on the day. This advance reflects a renewed risk premium in the market, as traders responded to escalating geopolitical tensions. Despite these gains, the broader market backdrop remains fundamentally bearish, as highlighted by the latest US EIA outlook projecting a widening global supply surplus and rising inventories through 2026.

The EIA’s November STEO underscores the increasingly bearish fundamentals for crude. The agency now expects global oil supplies to increase by 2.8 MMBbl/d in 2025 and by another 1.4 MMBbl/d in 2026, driven by robust growth from the US, Brazil, Guyana, and Canada, alongside the revival of OPEC+ production. As a result, the global supply surplus is projected to reach 2.17 MMBbl/d in 2026, up from last month’s estimate, and inventories are expected to build sharply, especially in OECD countries. Despite these bearish supply-demand dynamics, the EIA raised its crude price forecasts for 2026, citing ongoing strategic stockpiling by China and the impact of new sanctions on Russia’s oil sector as key factors supporting prices.

While fundamentals point to lower prices, Friday’s rally was driven by renewed geopolitical risks. In the Black Sea, a Ukrainian drone attack temporarily halted Russian exports from the key port of Novorossiysk, disrupting flows. Meanwhile, in the Gulf of Oman, Iranian forces seized a Marshall Islands-flagged tanker, further stoking concerns over the security of vital shipping lanes. These developments injected additional volatility and support into the market, highlighting the outsized influence of geopolitical events even as the underlying supply-demand balance remains loose.

In summary, while the EIA projects a growing supply surplus and accelerating inventory builds through 2026, recent geopolitical flare-ups have injected renewed volatility and support into the oil market. The combination of strategic stockpiling, sanctions-related risks, and sudden supply disruptions is keeping a floor under prices, even as fundamentals suggest a softer trajectory ahead. Despite this, AEGIS maintains a bearish position, reflecting our view that the underlying supply-demand imbalance will ultimately weigh on prices as geopolitical risks subside.

Natural gas posts modest weekly gain despite Friday selloff

The December Henry Hub contract gained 15c this week to settle at $4.57/MMbtu, despite trading as high as $4.69/MMbtu during the week. The Summer ’26 seasonal strip gained 4c to finish at $4.00/MMbtu and Winter ‘26/’27 settled 1c higher at $4.56/MMbtu. Price action was particularly volatile this week amid changes in near-term weather forecasts and what appears to be a tighter underlying supply-demand balance. This week also marked the transition to the withdrawal season.

The week started off with gas prices moving higher on colder two-week weather forecasts, lifting expectations for near-term gas demand.  Prices continued to advance throughout the week until a sharp move lower on Friday, driven by a sizeable warmer shift in weather forecasts. With the Winter ‘25/’26 season now beginning, there should be continued volatility driven by weather forecasts.

Outside of weather, the underlying fundamentals appear to be tightening, as several new records were set for LNG feedgas demand while supply remained relatively stagnant. Data from S&P showed LNG feedgas demand averaging 19.46 Bcf/d this week, as Plaquemines LNG pushed above 4 Bcf/d in inflows. Meanwhile production averaged 106.84 Bcf/d, slightly higher than last week. Continued strength in feedgas demand should keep the supply-demand balance relatively tight this winter.

This week also represented a shift into net storage withdrawals from injections. The EIA reported a build of 45 Bcf for last week, with the next report to show a withdrawal from inventories. The final injection of 2025 puts inventories at 3,960 Bcf, or 172 Bcf above the five-year average to start the withdrawal season. However, we do expect this surplus to tighten toward the five-year average over the course of winter.