Oil prices are expected to reach above $90/barrel in the third quarter, propped up by Chinese demand growth and OPEC+ production curtailment.

Prices rose above $85/barrel after OPEC+ cuts at the beginning of April before slumping below $75/barrel at the beginning of May, representing market fears regarding recession risks in the U.S. and Europe. We believe that Chinese demand will grow sufficiently over the coming months to offset the faltering global demand. If the coming months show a weaker mainland China than expected, prices may fall below expectations.

U.S. natural gas prices will continue to rise steadily through the year but will only crest at $3/MMBtu during the winter months. Prices have remained stubbornly low over the past months after coming down in January after a warm winter. Inventories ended the winter season at 1.8 trillion cubic feet (Tcf), as much above the five-year average as they were below in 2023 (0.3 Tcf). Freeport LNG and Calcasieu Pass LNG are both up and running, but this additional export demand has been insufficient to budge prices. Continued coal plant retirements do add volatility to the forecast, as they no longer act as a buffer. Extreme weather could change the pricing situation more quickly than it has in the past.