EMD068 - Strategic Positioning

Welcome to Energy Markets Daily. Tuesday, December 2, 2025 — Strategic Positioning. OPEC+ held the line. The market rallied. Now what? Let's talk positioning. **CRUDE OIL - THE SETUP** WTI is trading at $59.45. Brent at $63.32. The OPEC+ production freeze provided a short-term bounce. But the structural problem remains: oversupply. Goldman Sachs forecasts Brent at $62 and WTI at $58 by December 2025, falling to $55 and $51 by December 2026. The EIA expects WTI to fall to $50.30 in Q1 2026 and hold in the low $50s next year. WTI is range-bound, fluctuating below the 50-day moving average around $60. A breakout above $65 could lead to further upside. A break below $55.50 might signal a sharp decline. **The Position:** Bearish crude oil. WTI is testing critical support at $58. A break opens the door to $56, then $53. **NATURAL GAS - THE SURGE** Natural gas surged above $4.80 at the start of December, reaching its highest level in three years. On December 2nd, natural gas traded at $4.88 per MMBtu. The drivers are clear: Record LNG exports hit 10.7 million tons in November, up 40% year-over-year. Cold weather is driving early-season heating demand. And AI data centers are emerging as a new demand driver for electricity and natural gas. The expected trading range for December is $4.65 to $5.18. Natural gas is showing bullish momentum. As long as the $4.70 support holds, prices are likely to continue higher. **The Position:** Bullish natural gas. Target: $5.00 by Q1 2026. **THE FED FACTOR** The market is pricing in an 80% likelihood of a rate cut in December. The FOMC meets December 9-10 to decide on interest rates. Goldman Sachs expects the Fed to cut rates in December, with two additional 25 basis point cuts in March and June 2026. Lower interest rates generally boost economic activity and energy demand, potentially supporting oil prices. But oversupply concerns and rising inventories are weighing on crude. **The Takeaway:** The Fed rate cut is a tailwind for energy demand. But it won't fix the crude oil oversupply problem. **THE DECOUPLING THESIS** Crude oil is oversupplied. Natural gas is structurally undersupplied. This is the decoupling thesis playing out in real time. **The Trade:** Short crude oil. Long natural gas. **CATALYST WATCH** Wednesday, December 4th: EIA Petroleum Status Report. Thursday, December 5th: Weekly natural gas storage report. December 9-10: FOMC meeting. **FINAL WORD** OPEC+ held the line. But the market isn't buying it. Crude oil is testing support. Natural gas is breaking out. Trade the decoupling. For inquiries: energymarkets@protonmail.com. Subject: Energy Capital. This is Energy Markets Daily. We'll see you Wednesday with Macro Context.