Week Ending June 18

US-Iran Agreement Drives Crude Lower as Markets Shift Focus to Supply Recovery

Crude prices sank this week as the US and Iran formally signed a Memorandum of Understanding (MoU). On Thursday, WTI settled at $76.60/Bbl, down $8.28 from last week’s settlement. While uncertainty remains, the agreement between the two countries caps a significant selloff from the intra-conflict highs near $110/Bbl.

The MoU has raised expectations that traffic through the Strait of Hormuz could normalize in the coming weeks. According to Bloomberg vessel-tracking data, four supertankers carrying roughly 8 MMBbls of crude have either exited or are currently transiting the strait, including the first Saudi-owned vessels to make passage since the conflict began. The agreement has also enabled three Iranian tankers carrying nearly 5 MMBbls of crude to leave the recently lifted US Navy blockade, marking the first such outbound shipments in two months, according to Kpler.

Looking ahead, the US Treasury Department is expected to grant waivers covering Iranian crude oil, petrochemical products, and related exports, potentially adding to already growing supply expectations. The EIA projects global oil balances will average an oversupply of roughly 4 MMBbl/d in 2027 as Gulf production recovers alongside strong non-OPEC supply growth. On the demand side, Goldman Sachs estimates the disruption reduced oil demand by approximately 5 MMBbl/d, largely driven by lower Chinese imports. However, the bank expects roughly 90% of those losses to recover, with only about 500 MBbl/d of demand destruction proving more persistent as EV adoption continues to accelerate in China. Meanwhile, the IEA forecasts global oil consumption will decline by 1.1 MMBbl/d in 2026, a significantly steeper contraction than previously expected.

Wall Street banks have already begun lowering oil price forecasts in response to improving supply expectations. Goldman Sachs now expects Brent to average $80/Bbl in Q4 2026, down from $90/Bbl previously, while Morgan Stanley lowered its Q3 2026 Dated Brent forecast to $90/Bbl from $100/Bbl. The Cal 2027 strip has also fallen to roughly $68/Bbl, down from highs near $77/Bbl in May.

Despite the market's optimism, the MoU is only a 60-day interim framework. Negotiations could still break down, while the pace of Strait of Hormuz normalization remains uncertain. AEGIS maintains a neutral outlook.

Natural gas trades higher but remains in range

The prompt month Henry Hub contract gained 12c this week to settle at $3.20/MMBtu but remains down about 13c over the past two weeks. So far this month, the July contract has remained in a range between $3.00/MMBtu and $3.40/MMBtu.  Meanwhile, the Winter ‘26/’27 strip remains around $3.80/MMBtu and Summer ’27 is at $3.20/MMBtu.

Lower-48 population-weighted temperatures from the start of the month to now have been about average, and July is looking similar, according to Commodity Weather Group. Given the two-week forecast and what pattern looks likely for July, June through July temperatures could come in between the ten-year average and thirty-year average. While this is not a particularly bullish outcome, it is also not exceptionally bearish and should keep storage builds within a normal range.

This week, the EIA reported a 73 Bcf injection into underground storage for the week of June 12. This was slightly larger than the median expectation of 73 Bcf, according to the Bloomberg survey. This kept the storage surplus to the five-year average flat at +151 Bcf. Based on current weather forecasts for the next two weeks, the storage surplus should expand slightly. Our modeling still shows inventories reaching about 3.91 Tcf by the culmination of the injection season, which would put Lower-48 storage about 110 Bcf above the five-year average at the start of winter.

Associated gas production may begin ticking higher soon, as Kinder Morgan’s 500 MMcf/d Gulf Coast Express Expansion out of the Permian is currently starting up. This event combined with a reduction in pipeline maintenance and improvements to demand has lifted Waha basis.