Oil & Gas Prices - Dec 3

[dan_s]

WTI oil futures rose to $59.10 per barrel on Wednesday, as attacks on Russian energy assets weighed against the lingering view of an oversupplied market. Risk on the supply of Russian oil and fuel prevailed after strikes on Russian tankers and oil refineries, with the Kremlin threatening retaliation against Ukrainian allies should strikes continue. The risk premia was also maintained as the US and Russia did not reach a compromise on a possible peace deal with Ukraine, extending the possibility of shocks to Russian refining and shipping capacity, while the US escalated threats against oil giant Venezuela. In the meantime, tanker activity indicated that oil at sea from Russian producers soared by 20% in three months as US sanctions prevented deliveries. The developments limited the impact of higher production quotas from OPEC+ nations and soaring output levels from drillers in the US, Canada, and Brazil, although the IEA maintained its view of a surplus in the oil market next year.

US natural gas futures rose to a three-year high of $5.01/MMBtu in early December, soaring 65% since the lows from mid-October amid a backdrop of soaring export demand. European countries extended their shun of Russian natural gas and confirmed the complete phase out of Russian LNG by the end of 2027. This coincided with fresh evidence that US LNG exports rose 40% annually in November to 10.7 million tonnes, even though producers continued increasing output. Demand was also underpinned by forecasts of a cold front at the start of the North American winter, led by lower temperatures in the Northeast and Great lakes. Consequently, the latest EIA data showed that utilities unexpectedly withdrew 11 billion cubic feet of gas from storage in the week ending November 21 to consolidate the start of the seasonal withdrawal season.

The December weather forecast for the eastern U.S. is very bullish of HH Ngas price. The U.S. Ngas surplus to the 5-year average should be gone by year-end our early January. Q1 will be very interesting.

[dan_s]

The NYMEX front-month natural gas contract is testing $5.00/MMBtu as weather forecasts point to the highest December heating demand in 15 years.

After maintaining a triple-digit storage surplus to five-year normals since May, natural gas inventories may plunge to a triple-digit deficit to open January.

Looking into 2026, record demand-side LNG exports mixed with supply-side midstream pipeline bottlenecks underscore a constructive backdrop with meaningful upside.

Structurally, as natural gas prices sustain levels above $4.50-5.00/MMBtu, short-term fundamentals become increasingly price-inelastic. Should January mirror December’s anomalous cold, the combination of (i) rapid erosion of storage, (ii) elevated weather-driven demand, (iii) all-time high LNG feedgas demand, (iv) heightened freeze-off risks, and (v) a forward curve sitting at the base of a hockey-stick profile sets the stage for substantial upside price risk.