Week Ending April 10

Ceasefire Fails to Ease Physical Tightness as Supply Risks Persist

The crude market this week remained defined by geopolitical disruption and uncertainty surrounding the Strait of Hormuz, with physical supply constraints persisting even as diplomatic efforts introduced periods of temporary relief. The WTI prompt-month contract settled at $96.57/bbl on Friday, up or down $14.97 from last week’s frenetic close, as the market navigates a complex mix of ceasefire negotiations, infrastructure risks, and evolving supply expectations.

A two-week ceasefire was announced midweek, providing a framework for reopening the Strait under Iranian coordination and allowing limited transit to resume. Despite this development, the underlying physical reality remains largely unchanged. Flows through the strait continue to be constrained, with limited vessel movement, while broader regional tensions and ongoing strikes continue to cloud the outlook for a durable resolution. Prices moved sharply lower following the announcement, reflecting a rapid unwind of risk premium despite no meaningful improvement in physical flows.

At the same time, risks to energy infrastructure continue to build. Recent strikes have reduced Saudi Arabia’s production capacity by nearly 600 Mbbl/d, while flows along the East West pipeline fell by roughly 700 Mbbl/d, limiting the ability to bypass the strait and redirect crude to the Red Sea. These disruptions highlight that supply losses extend beyond transit constraints and may delay recovery, as infrastructure repairs and logistical normalization are unlikely to be immediate.

The latest Short Term Energy Outlook from the Energy Information Administration reinforces this tightening backdrop. The report, released prior to the ceasefire, assumes disruptions persist through the end of April and reflects a sharp shift from prior expectations of surplus conditions. Crude production shut ins are estimated to have averaged 7.5 MMbbl/d in March and are expected to peak near 9.1 MMbbl/d in April, driving projected inventory draws of 5.1 million barrels per day in the second quarter.

The market is continuing to move away from the surplus framework that defined expectations earlier this year. Most analysts assume the conflict resolves by the end of April, with flows recovering in May and nearing pre conflict levels by June. However, JPMorgan Chase suggests a more cautious path, with only partial volumes returning in May and full restoration not occurring until June, while a slower recovery into July could add $15 to $20 per barrel of upside risk.

Looking ahead, the market remains highly dependent on the timing and durability of any resolution. Temporary de-escalation has not yet translated into a meaningful improvement in flows, and supply risks remain elevated. With disruptions still material and recovery timelines uncertain, crude continues to trade within a tighter and more fragile balance. AEGIS maintains a neutral outlook.

Natural gas decline continues amid exceptionally weak demand

The May Henry Hub contract lost another 13c this week to settle at $2.67/MMBtu, bringing losses over the past two weeks to 36c. The selling pressure was seen across the curve, with the Winter ‘26/’27 seasonal strip falling 12c to $4.00/MMBtu, and Summer ’27 down 9c to $3.25/MMBtu. The weakness across the gas curve has been driven by exceptionally weak near-term demand, which has pushed end-of-season gas storage estimates higher.

Weather-driven demand, or the lack of it, continues to drive price action. Lower-48 population-weighted average temperatures are currently forecast to be above the ten-year average for the next two weeks, following a similarly warm period over the past week. While this is one of the lower demand periods of the year, the bearish weather pattern has reduced demand further. This has resulted in higher expectations of gas in storage at the start of next winter, pressuring forward prices lower. When looking at the supply-demand balance on a weather-normalized basis, things do not look as bearish. Our calculation of the weather-adjusted supply-demand balance shows tighter conditions year over year, as structural demand growth has slightly outpaced supply.

Despite the weak price environment, production and drilling activity in the Haynesville has not suffered. Dry gas production has jumped to the highest level in more than a year, at 15.23 Bcf/d, and the Baker Hughes rig count shows 56 rigs operating. Producers may be looking past the current weakness towards the strong demand growth on the horizon.

The outlook for LNG feedgas continues to look strong, with Golden Pass Train 1 now taking about 400 MMcf/d. The facility recently began producing LNG for export purposes, which should result in a more linear ramp up of flows toward Train 1’s full capacity of 790 MMcf/d.