February 2026 Oil Update Daan Struyven Managing Director Co-Head of Commodities Research; Head of Oil Research Goldman Sachs & Co. LLC +1 212-357-4172 daan.struyven@gs.com Yulia Grigsby Vice President Senior Energy Strategist Goldman Sachs & Co. LLC +1 646-446-3905 yulia.grigsby@gs.com The estimated fair value sums the fair value estimates for 1m/36m timespreads and for 36m futures. The fair value estimate of timespreads uses OECD commercial stocks as days of demand (1-4 months ahead) and interest rates. Th ...

22 February 2026 | 6:57PM EST Commodities Research OIL ANALYST Raising Our Price Forecast on Lower OECD Stocks Despite Same Global Surplus; Geopolitical Risks Persist Daan Struyven +1(212)357-4172 | daan.struyven@gs.com Goldman Sachs & Co. LLC Yulia Zhestkova Grigsby +1(646)446-3905 | yulia.grigsby@gs.com Goldman Sachs & Co. LLC Alexandra Paulus +1(212)902-7111 | alexandra.paulus@gs.com Goldman Sachs & Co. LLC Filippo Cuscito +44(20)7051-9073 | filippo.cuscito@gs.com Goldman Sachs International Investors sh ...

Group 1: ETF Performance - The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) trades at $147.89 as of February 13, 2026, with a year-to-date gain of 17.1% despite commodity headwinds [2][6] - The fund's 99.9% concentration in energy allows it to capture sector opportunities while mitigating single-company risk through diversification across upstream producers [4] Group 2: Company Performance - ConocoPhillips reported an adjusted EPS of $1.02 for Q4 2025, missing estimates as realized prices fell 19% year-over-year to $42.46 per barrel of oil equivalent [3][6] - Diamondback Energy exceeded Q3 2025 expectations with an EPS of $3.51, driven by strong operational performance in the Permian Basin [4][6] Group 3: Market Dynamics - WTI crude oil price peaked at $75.89 in June 2025 but retreated to $64.53 as of February 9, 2026, indicating margin pressures for producers [5][6] - The current WTI price is in a critical zone, maintaining profitability for efficient operators but below levels that would encourage aggressive capital deployment [5]

Group 1 - Geopolitical factors are significant, but the 2026 energy markets are influenced by more than just headlines, indicating a complex landscape ahead [1] - The year 2026 will see the largest supply expansion in history, with traders preparing for a global surplus, which may lead to volatility in Henry Hub prices due to potential project delays [1] - Oil supply from countries like Ghana, Canada, and Brazil is increasing, presenting a dilemma for OPEC Plus regarding whether to lower output or accept lower oil prices [1] Group 2 - China's policies, including crude stockpiling and refined product export licenses, have the potential to drastically alter global market fundamentals overnight [2] - The correlation between the US dollar and oil prices may be tested, with central bank actions potentially leading to significant price movements for WTI in 2026 [2] - The demand for electricity driven by data centers is at its highest in 15 years, linking the AI boom to energy needs and influencing oil markets [2]

Group 1 - The core point of the article highlights the strong performance of the U.S. labor market as indicated by the January non-farm payroll data, which exceeded market expectations and impacted market sentiment regarding the Federal Reserve's interest rate decisions [1][3] - The January non-farm payroll data showed an increase of 130,000 jobs, significantly above the market expectation of 70,000 jobs, and the unemployment rate decreased by 0.1 percentage points to 4.3%, lower than the expected 4.4% [3] - Average hourly earnings for private sector non-farm employees rose by $0.15 to $37.17, reflecting a year-on-year increase of 3.7%, also surpassing market expectations [3] Group 2 - The strong non-farm payroll data led to a rapid decline in the market's expectations for a rate cut by the Federal Reserve, with the probability of a 25 basis point cut in March dropping from 19.6% to 6%, while the probability of maintaining the current rate rose to 94% [3] - Following the release of the non-farm data, U.S. stock indices experienced a decline, with the Dow Jones Industrial Average closing at 50,121.40 points, down 0.13%, and the Nasdaq Composite Index down 0.16% [4] - Concerns regarding the AI industry and the cooling of rate cut expectations contributed to the downward pressure on U.S. stocks, with technology stocks particularly affected [4] Group 3 - In contrast to the pressure on U.S. stocks and bonds, precious metals such as gold and silver saw a V-shaped reversal, with gold prices rising from a low of $5,020.07 per ounce to $5,089.36 per ounce [5] - The rise in gold and silver prices is attributed to safe-haven demand amid ongoing AI industry concerns and a retreat in the U.S. dollar, despite the cooling rate cut expectations [5] - The oil market exhibited a volatile pattern, with Brent crude oil reaching nearly $70 per barrel before retreating due to global demand concerns and a strengthening dollar, ultimately closing at $69.40 per barrel [5] Group 4 - Market focus is shifting towards upcoming U.S. CPI data and statements from Federal Reserve officials to further assess the direction of monetary policy, while ongoing dynamics in the AI industry and geopolitical issues in the Middle East continue to influence market sentiment [6] - The sustained pressure on U.S. stocks and bonds, the momentum of gold and silver prices, and the potential for oil prices to break out of their current volatility remain to be validated by future data and events [6]

Market Overview - The Dow Jones Industrial Average surged by 853.91 points, or 1.75%, reaching 49,762.63, marking one of its strongest single-day rebounds this year [1][15] - The S&P 500 increased by 73.61 points (1.08%) to 6,872.01, while the Nasdaq Composite rose by 188.76 points (0.84%) to 22,729.34 [1][15] Sector Performance - The energy sector played a significant role in the market surge, with WTI Crude Oil stabilizing around $63.64, leading to a nearly 6% jump in Halliburton due to robust domestic drilling outlooks for the first half of 2026 [2][9] - Financials also contributed to the rebound, with large U.S. banks rising as investors anticipated steadier net interest margins and reduced recession odds [7][16] - Healthcare stocks rebounded as defensive capital rotated back into the sector, enhancing stability [7][10] Investment Trends - The market exhibited a "risk-on" appetite for hard assets, with gold prices spiking 1.62% to $4,968.90 and Bitcoin surging over 8% to reclaim the $68,000 level, indicating a return of liquidity to the markets [3][14] - Trading volume surged across blue-chip stocks, and volatility eased, suggesting a reset in market positioning rather than a mere relief bounce [4][16] Comparative Analysis - The Dow outperformed both the S&P 500 and Nasdaq due to its composition, which leans towards banks, energy producers, healthcare giants, and industrial leaders, as opposed to tech-heavy indexes [5][8] - The divergence in tech stocks, with Nvidia surging while Amazon dropped over 9%, indicates that stock selection is becoming more critical than sector exposure [11][12] Broader Market Implications - The rally extended beyond equities, with commodities and crypto markets also showing strength, reflecting improving liquidity conditions and rising investor confidence [13][14] - ETF flows were decisive, with semiconductor bull ETFs experiencing double-digit gains, while inverse funds collapsed, further supporting the bullish sentiment across various asset classes [14]

Summary of Key Points from the Conference Call Industry Overview - The report discusses the volatility in the dollar and commodities, particularly focusing on precious metals like Gold and Silver, which experienced significant corrections recently [1][10]. Core Insights and Arguments - **Precious Metals Volatility**: Gold and Silver saw their sharpest corrections since the 1980s, with Gold dropping by 11% and Silver by 31% after reaching record highs [1]. - **S&P 500 Performance**: The S&P 500 briefly hit 7,000 during the 4Q25 earnings releases, with 47% of market cap reporting and 59% beating consensus EPS by more than one standard deviation [1]. - **Dollar Movement**: The Dollar fell to its lowest level since February 2022 but reversed its trend later in the week. The Federal Reserve maintained interest rates at 3.50–3.75%, citing improvements in growth and labor markets [1]. - **ISM Manufacturing Index**: The ISM manufacturing index reported a strong figure of 52.6, surpassing the median forecast of 48.5 [1]. - **Risk Appetite Indicator**: The Risk Appetite Indicator (RAI) peaked at 5-year highs two weeks ago, driven by growth optimism, but has since moderated. Key drivers included small-cap stocks, cyclicals, emerging market assets, and Dollar weakness [2]. - **Geopolitical Risks**: Geopolitical tensions have exerted upward pressure on commodities, particularly precious metals, which rallied sharply due to a liquidity squeeze in London [3]. - **Gold/S&P 500 Ratio**: The Gold/S&P 500 ratio increased, indicating a divergence between precious metals and equities, with Gold volatility spiking to levels last seen during the COVID-19 crisis [3][21]. - **Asset Allocation Strategy**: The company remains modestly pro-risk in asset allocation for 2026, despite the elevated risk appetite increasing the potential for volatility. The expectation is for a modest decline in the Dollar this year, particularly against emerging market and cyclical currencies [4]. Additional Important Insights - **Cross-Asset Correlations**: There is a noted negative correlation between the US Dollar and various assets, particularly global equities excluding the US, emerging market equities, and commodities like Gold [3][17]. - **Future Projections**: The commodities team projects a price of $5,400 for Gold by December 2026, with specific hedging strategies recommended in a rising Dollar scenario [9]. - **Market Sentiment**: The report highlights the importance of managing US asset dominance through regional diversification and selective FX hedging [4]. This summary encapsulates the key points from the conference call, focusing on the volatility in the dollar and commodities, particularly precious metals, and the implications for market strategies and asset allocation.

Core Viewpoint - The content emphasizes the importance of conducting personal due diligence and consulting with competent advisors before making any financial decisions, particularly in relation to investments in cryptocurrencies and CFDs [1]. Group 1 - The website provides general news, personal analysis, and opinions, as well as materials from third parties for educational and research purposes [1]. - It explicitly states that the information should not be interpreted as a recommendation or advice for any financial actions, including investments or purchases [1]. - The accuracy and reliability of the information are not guaranteed, and users are advised to consider their individual financial situations before relying on the content [1]. Group 2 - The website includes information about complex financial instruments such as cryptocurrencies and CFDs, which carry a high risk of losing money [1]. - Users are encouraged to conduct their own research and fully understand the workings and risks of any financial instruments before investing [1].

Market Reactions - The announcement of Kevin Warsh as the next Federal Reserve Chair led to initial market volatility, with the Dow Jones Industrial Average (DJIA) dropping 139.16 points (0.28%) before recovering to close up 55.96 points (0.1%) at 49,071.56 [3][11] - The S&P 500 (SPX) experienced fluctuations, closing down 0.4% at 6,939.03 after earlier dipping as much as 1.1% [3][11] - The NASDAQ Composite (IXIC) ended the day down 0.7% at 23,685.12, marking a mixed market response overall [3][11] Commodity and Bond Market Impact - Gold prices fell over 4% to $5,115.60, while silver dropped nearly 13%, indicating a shift in investor sentiment [4] - The 10-year Treasury yield increased to 4.25% from 4.24%, reflecting changing bond market dynamics [4] Trade Policy Developments - President Trump's executive order on January 30, 2026, imposed tariffs on nations supplying oil to Cuba, causing immediate fuel shortages in Havana and raising concerns about a humanitarian crisis [7][8] - The price of WTI Crude Oil saw a slight decrease of 0.29% to $65.27, with potential long-term risk premiums of 8-15% anticipated due to supply constraints [8] Aviation Sector Reactions - The threat of a 50% tariff on Canadian-made aircraft, particularly affecting Bombardier, led to a 9% drop in Bombardier shares on January 30, 2026 [10] - The aviation sector reacted negatively to the announcement, with experts expressing skepticism about the tariffs' implementation but acknowledging the significant financial implications [10] Overall Market Trends - Despite the tumultuous events, the DJIA recorded its ninth consecutive month of gains, while the SPX ended January with its eighth positive month in nine [11] - The IXIC, however, closed lower for the month, breaking a seven-month winning streak, indicating varied performance across indices [11] - Trading volume on January 29, 2026, was notably high at 23.36 billion shares, suggesting active investor engagement amid policy uncertainty [12]

Precious Metals - Silver surged through the $100-per-ounce threshold, trading around $101 per ounce, marking a 230% gain over the past year [1] - Gold approached the $5,000-per-ounce level, which is nearly 80 percentage points higher than a year earlier [1] - Palladium increased by 6%, surpassing $2,000 per ounce for the first time since November 2022, while platinum rose 5% to all-time highs above $2,700 per ounce [2] Energy Prices - Henry Hub natural gas rose by 2% to $5.15 per million British thermal units, with week-to-date gains exceeding 60%, marking the strongest weekly surge on record due to extreme cold weather in America [3] - Crude prices also advanced, with WTI rising more than 2% to near $61 a barrel [3] Stock Market Performance - The S&P 500 traded broadly flat, while the Nasdaq 100 rose by 0.5%, and small caps lagged with the Russell 2000 falling by 0.6% [4] - The energy sector led the market for a second consecutive session, reaching levels last seen in 2014, while financials underperformed [4] Earnings and Major Movers - Intel Corp. experienced a significant decline of over 17% after issuing weak first-quarter 2026 guidance, marking its worst session since August 2024 [5] - In the Russell 1000, top gainers included Corcept Therapeutics Inc. (+6.71%) and Booz Allen Hamilton Holding Corp. (+6.40%), while top losers included Intel Corp. (-16.91%) and First Citizens BancShares Inc. (-8.88%) [6][8]