Week Ending January 2

Crude falls ahead of OPEC+ meeting

On the first trading day of 2026, Brent crude fell to near $60/Bbl amid expectations of a global supply surplus. The oversupply backdrop is offsetting ongoing geopolitical risks across several OPEC+ nations. West Texas Intermediate settled on Friday, January 2, at $57.28/Bbl.

Key OPEC+ members, led by Saudi Arabia, are scheduled to meet online on January 4 and are expected to reaffirm their decision to pause supply increases during the first quarter of 2026. Oil prices deteriorated throughout 2025 as both non-OPEC+ and OPEC+ producers increased output while demand growth remained muted. The EIA is forecasting a surplus exceeding 2 MMBbl/d in 2026.

Despite the looming glut projected by analysts, supply-side risks persist, even though prices are not currently reflecting them. The Trump administration has intensified its campaign against Venezuelan oil exports through vessel blockades and expanded sanctions, aiming to increase pressure on Nicolás Maduro. Venezuela accounts for roughly 1% of global daily oil supply.

The conflict between Russia and Ukraine remains the most significant threat to global trade flows. Sanctions on Russia have driven a sharp increase in oil-on-the-water, with some Russian vessels left without clear destinations for their crude. Despite ongoing peace efforts, both countries continue to target Black Sea ports, damaging oil infrastructure, including refinery assets. The conflict has also disrupted energy flows from Kazakhstan, another OPEC+ producer.

Heading into the new year, we remain bearish, as we see additional downside risk and price pressure if projected supply-demand balances materialize.

Natural gas reverses last week’s gains as weather turns warmer

The February Henry Hub contract fell 26c this week to settle at $3.62/MMbtu, reversing all of last week’s gains. The rest of the forward curve also moved lower, with the Summer ’26 seasonal strip down 17c to settle at $3.45/MMbtu and Winter ‘26/’27 down 8c to settle at $4.18/MMbtu. A weaker near-term demand outlook continued to weigh on front month pricing, while the shortened trading week also saw two storage reports released over the course of four days.

Lower-48 population-weighted average temperatures started 2026 slightly below the ten-year average but are forecast to warm up significantly over the next several days. This represents a significant change compared to Monday’s forecast, which showed temperatures largely at or below the ten-year average. If current forecasts pan out, this should result in weaker gas demand and smaller storage withdrawals for the next two weeks.

This was a busy week for EIA storage data, with two inventory reports released. One for the week ending December 19 came out on Monday, while the report for the week of December 26 was released on Wednesday. Monday’s report was similar to the prior data point, with a withdrawal of -166 Bcf reported, however Wednesday’s release showed a much smaller -38 Bcf withdrawal. Monday’s report showed inventories below the five-year average for the first time since earlier in 2025, but this deficit was shown to have been erased the following week. As of December 26, Lower-48 gas inventories sit at 58 Bcf above the five-year average. With the next two weeks looking warmer-than-average this surplus may expand some, but inventories are still relatively close to the five-year average.