The Enverus Intelligence® Research Method
Author: Al Salazar, Director of Macro Research, Enverus Intelligence® Research
Enverus Intelligence® Research, Inc., a subsidiary of Enverus, provides the Enverus Intelligence® | Research (EIR) products. See additional disclosures.
This Enverus Intelligence® Research guide explores the science of oil and gas price forecasting, providing a data-driven framework for risk management in energy markets. It explains how traders, analysts and risk managers can use energy trading solutions and market fundamentals to understand oil and natural gas price formation, manage volatility and improve capital decisions.
In the energy industry, few tasks are more beleaguered than forecasting oil and gas prices. The skepticism is familiar:
There’s truth in these statements. Prices are volatile, often driven by unpredictable events that disrupt supply and demand. The forward curve remains the most transactable view for securing cash flows. And as data becomes more robust and accessible, forming a truly unique, data-driven view is increasingly difficult.
Yet those with exposure to oil and gas prices, especially traders, risk managers and analysts, must develop an intimate understanding of how their commodity is priced, both today and in the future. Understanding the fundamentals behind oil and gas price forecasting is not only a competitive advantage, it’s an essential component of modern energy trading and risk management. As AI and advanced analytics reshape forecasting speed and depth, integrating high-frequency data and predictive modeling has become a critical part of well-informed energy decision-making.
This guide is specifically written for these professionals, recognizing that success in their roles depends not just on forecasting — getting the price “right” — but on practicing informed risk management. Managing price risk is as essential as buying health, auto or home insurance, but with significantly higher dollar values. An informed commodity view enables rational risk-taking and supports sound capital decisions.
A clear fundamental view begins with a comprehensive, data-driven outlook on future supply and demand. In the short term, the net balance between the two drives changes in storage levels, a key influence on pricing. Over the medium to long term, this balance helps identify the marginal cost of supply, which plays a central role in price formation.
In the Enverus framework, oil and gas price forecasting begins with a data-backed understanding of production, consumption and trade flows. We translate these fundamentals into actionable risk management in energy market strategies.
Oil has long demonstrated a strong inverse correlation between OECD crude and product inventories and Brent prices (Figure 1). While some analysts have questioned the durability of this relationship, suggesting it has broken down, those claims have largely faded. Today, the correlation remains intact.
Looking back, did it ever make sense for this relationship to break? Would oil truly be worth less when inventories are lower? Or is it more plausible that speculative trading temporarily distorts this long-standing relationship while the underlying logic remains sound?
Evidence suggests the latter has prevailed.
During periods of geopolitical unrest, particularly in the Middle East, media outlets and market commentators often cite a “geopolitical premium” in oil prices. Yet this term is rarely qualified. Premium relative to what? Inventories? Forward cover? Establishing a fair value for a barrel of crude is essential to quantifying what a geopolitical premium is truly worth.
In the near term, oil price movements can be heavily influenced by trading algorithms and sentiment-driven flows. In the absence of new data or fundamental drivers, technical analysis often dominates and guides short-term market entry and exit decisions. However, fundamentals should dictate how long a position is held. They provide the foundation for conviction, capital allocation and effective risk management.
Enverus combines macroeconomic modeling, market psychology analysis and energy solutions like Enverus MarketView® and Enverus PRISM® to quantify these relationships. This integration allows analysts to test hypotheses and build data-backed views of oil price forecasting accuracy across time horizons.
While the approach to gas price formation shares similarities with oil, the correlations are less durable. Lower 48 gas storage levels show only loose relationships with Henry Hub pricing. For global benchmarks like TTF and JKM, our methodology leans heavily on identifying the marginal supplier of LNG, a key determinant of price.
But natural gas customers aren’t only focused on Henry Hub or TTF/JKM. Regional pricing matters. In theory, the difference between any two pricing points should reflect the cost of transport. In practice, local supply and demand dynamics can cause differentials to widen or narrow significantly.
Gas basis is largely a function of infrastructure, particularly takeaway capacity. This is especially true in regions anticipating robust production growth, such as the Permian and Haynesville, where constraints can lead to pronounced basis volatility.
At Enverus, natural gas price forecasting leverages pipeline data, LNG trade flows and production analytics. These factors are modeled within energy solutions Enverus PRISM® and provide output to Enverus MarketView®, helping energy and commodity trading organizations assess basis risk, market constraints and evolving infrastructure impacts.
U.S. oil and gas supply benefits from an exceptional depth of data. Type curve analysis, rig tracking and well-level activity metrics, areas where Enverus excels, are frequently used by clients to build high-frequency, forward-looking views of global supply over the next 25 years. These data-driven insights also enhance risk management in energy markets, supporting capital allocation, hedging strategies and long-term planning.
Embedded within these production forecasts are insights into cost structures, operational efficiencies and producer behavior under varying price scenarios. Supply is one domain where market participants can gain a fundamental competitive edge, especially when leveraging advanced solutions like Enverus PRISM® to convert granular data into actionable intelligence.
Globally, the supply picture becomes less transparent, making access to reliable data even more critical. Enverus scout teams, deeply familiar with their respective regions, help define oil and gas supply potential. Their insights into both below- and above-ground variables, from geology to geopolitics, can significantly shape fundamental views. This type of intelligence is often exclusive to those with access to the specialized networks and solutions that Enverus offers.
On the oil side, OPEC adds another layer of complexity. Commentary around OPEC is often dominated by speculation on intent, confidential economics and the ever-elusive spare capacity. While this noise can be distracting, a simple look at past behavior often provides a clearer guide to future performance.
Oil demand is equally beleaguered, and its analysis faces challenges just as complex as price forecasting. In the short term, demand estimates are often built on correlations with macroeconomic indicators such as GDP, industrial production and transportation metrics. Some analysts even default to using refining runs as a proxy for demand. But this oversimplifies the picture since refining activity doesn’t necessarily reflect consumption, as a portion of refined products may end up in storage.
This underscores a key point: supply data tends to be more transparent and reliable than demand data. These demand signals feed directly into oil price forecasting models that assess how macro trends, transportation shifts and industrial behavior impact long-term energy prices.
In the medium to long term, demand modeling shifts toward evaluating petrochemical capacity additions, the durability of environmental regulations, the adoption of alternative transportation fuels, including electric vehicles (EVs) as well as biofuel blending and LNG truck penetration.
Despite all the modeling, one reality has become clear: the oil analyst community has consistently underestimated oil demand — with the possible exception of OPEC. However, adopting OPEC’s demand view introduces its own set of biases. Still, demand has proven far more resilient than expected.
Few forecasters would have predicted that European gasoline demand would be 300,000 barrels per day higher than pre-COVID-19 levels, even with a consistent 20% EV adoption rate. Automakers, in hindsight, may be reassessing the scale of their EV investments as uptake outside of China has been underwhelming. Neither stock models nor regression-based approaches would have captured how EVs have failed to meet expectations.
So, is there hope for oil demand prognosticators?
Hope lies in acknowledging past errors. Models must be recalibrated, correlations refitted and methodologies rebuilt. Demand is the area where oil market analysis has the most room to improve.
Natural gas demand is overwhelmingly driven by weather. Roughly 95% of short-term demand variability can be attributed to temperature patterns. The remainder reflects a mix of gas-fired generation dynamics and industrial demand growth.
Our outlook for gas-fired generation is closely tied to power demand forecasts, with particular focus on data center expansion and renewable energy penetration. These factors shape how natural gas competes within the power stack. Enverus’ Energy Transition and Power teams lead comprehensive reviews of how gas-fired generation interacts with competing fuels and evolving electricity demand, a critical input for long-term modeling.
Looking further ahead, the natural gas demand picture becomes more complex with the rise of the North American LNG revolution. With LNG export capacity expected to double by the end of the decade, North America will increasingly import international natural gas fundamentals and volatility.
To support this view, we’ve analyzed power generation profiles by country, assessed renewable energy targets and estimated the future global power mix. On the infrastructure side, we’ve made broad assumptions around key pipeline developments, assumptions that any credible long-term outlook will need to incorporate.
The integration of weather-driven demand and LNG export data has made natural gas price forecasting increasingly global. Solutions like Enverus MarketView® and Enverus PRISM® provide transparent modeling environments for simulating these dynamics and managing exposure in energy trading and risk management workflows.
The new era of oil and gas price forecasting combines human expertise, high-frequency market data and AI-powered analytics to form more defensible, transparent and actionable forecasts.
Let’s revisit the common critiques of price forecasting, and our responses:
It’s the practice of using data, models and analytics to estimate future commodity prices and manage price exposure in volatile energy markets.
Enverus combines proprietary production, demand and storage data with solutions like Enverus MarketView® and Enverus PRISM® to enable users to generate forecasts and actionable insights.
Accurate oil and gas price forecasting enables informed hedging, capital planning and portfolio optimization within the broader framework of risk management in energy markets.
Enverus’ oil price forecasting considers several key factors: the strong inverse correlation between OECD crude and product inventories and Brent prices, the quantification of “geopolitical premiums” during unrest, and the influence of short-term trading algorithms and sentiment-driven flows. Longer-term positions are driven by fundamental views.
Enverus integrates macroeconomic modeling, granular supply data and specialized energy solutions like Enverus MarketView® and Enverus PRISM®. This comprehensive approach allows analysts to test hypotheses and develop data-backed views on oil price forecasting accuracy across different time horizons.
While sharing similarities, natural gas price forecasting exhibits fewer durable correlations than oil. Lower 48 gas storage levels have only loose relationships with Henry Hub pricing. Global benchmarks like TTF and JKM rely heavily on identifying the marginal supplier of LNG, and regional pricing is significantly influenced by local supply–demand dynamics and transportation costs.
Oil demand forecasting faces challenges because of less transparent data compared to supply, with forecast models often underestimating demand. Improvements require acknowledging past errors, recalibrating models, refitting correlations and rebuilding methodologies to better account for evolving macro trends, transportation shifts and industrial behavior.
Natural gas demand is predominantly driven by weather, accounting for about 95% of short-term variability. Net of weather, Enverus leverages power demand forecasts, data center expansion, renewable energy penetration and the impact of the North American LNG revolution on natural gas demand. Solutions like Enverus MarketView® and Enverus PRISM® simulate these dynamics for energy trading and risk management.
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