Barclays has updated its forecast for Brent crude oil to US$72 per barrel for 2025 and $70 for 2026. The bank expects US oil demand to rise by 130,000 barrels per day this year, an increase of 100,000 from previous predictions. Geopolitical tensions have lessened due to a ceasefire between Israel and Iran mediated by the U.S. This has lowered the risk premium and recent price trends reflect stronger market fundamentals. The new forecast from Barclays indicates a better balance between supply and demand as geopolitical concerns ease. The increase in U.S. demand highlights ongoing activity in transport and manufacturing sectors. With the situation between Israel and Iran stabilizing, fears of major supply disruptions have decreased. This has eliminated some of the risk premium that had supported higher prices. Consequently, recent price movements are now more in line with core fundamentals such as refinery usage, inventory changes, and shipping activities rather than market speculation. This shift suggests a reduction in price volatility and indicates healthier supply buffers and spare capacity. It’s advisable to track crude differentials and product crack spreads, especially in the Atlantic Basin, to see if supply balances are tightening or just stabilizing. From a volatility perspective, the options market shows reduced implied volatility across most timeframes. Calendar spreads, particularly for December contracts, are less biased toward backwardation, which aligns with decreased short-term market pressures. However, we may still face congestion in front-month spreads due to refinery maintenance and seasonal turnarounds. We should also monitor large commercial positions, which are beginning to unwind some defensive long trades placed during heightened Middle Eastern risks. This trend is showing in slightly lower passive trading flows, although it hasn’t reversed the overall market direction yet. The main takeaway is that market pricing is increasingly reflecting neutral conditions. This means more stable curve structures and less urgency in trades related to macroeconomic hedges. Volatility sellers will likely find better opportunities around specific data releases and inventory reports rather than from ongoing geopolitical shifts. For spread traders, the upcoming weeks may present chances for relative value trades across crude grades based on Atlantic versus Pacific flows, particularly if WTI-Brent spreads remain tight. It’s important to note that refinery cuts in Asia may be balanced by increased production in the West, potentially leading to small contango at the front end. With reduced macro volatility and clearer demand trends, hedging decisions should now be more strategic. We should react to inventory cycles, shipping disruptions, or unexpected refinery issues rather than speculative headlines that might not happen.

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