HSBC believes that a large surplus after summer could affect its $65 per barrel Brent forecast for the fourth quarter of 2025. The bank expects an extra 550,000 barrels per day in September, which will change the supply and demand balance. Right now, summer demand in the Northern Hemisphere and the Middle East, especially for power generation, is using up extra OPEC+ barrels. This seasonal demand helps balance the increased supply but raises concerns about future supply and consumption. HSBC warns that we might see a big difference between supply and demand as summer ends. The forecast surplus—boosted by the expected 550,000 barrels per day in September—signals that more production, without a corresponding rise in demand, could lower Brent prices significantly. The $65 forecast for Q4 2025 now faces more challenges because of this added supply. The current use of OPEC+ barrels, driven by high temperatures in the Middle East and Northern Hemisphere, is seasonal and will likely drop as the demand for power generation decreases. This indicates that the extra demand provided by summer is temporary. As temperatures cool and the use of air conditioning decreases, the demand cushion will lessen and make the surplus more apparent. Looking ahead, the extra barrels expected in September shouldn’t be considered alone; they should be balanced against the likely drop in demand as we approach late Q3. This shift increases the risk of price changes. Remember, the futures market usually anticipates these trends in advance. Wang’s supply projections highlight another concern: the market won’t lack oil, and production levels might not match consumer demand in the future. For traders in futures and options markets, this data indicates that there may be limited potential for higher prices in the medium term, unless there’s a surprise drop in global inventories. The motivation to buy long positions for the fourth quarter weakens if real consumption doesn’t rise with production. Instead of waiting for inventory reports to show trends, we should adjust our exposure based on reliable production signals and future demand indicators. It’s important to note that major exporting countries have shown strong production capacity despite past output limits. This might boost traders’ confidence in supply stability, even if economic or geopolitical risks decrease. In the future, the shape of the forward curve may show signs of strain. A shift from backwardation to contango could indicate a softer spot price and make long positions more costly to hold. In this case, storage costs would become more relevant. Traders watching time spreads should keep a close eye on these potential changes in the curve, as they influence outright pricing and the cost basis for many arbitrage strategies. While seasonal demand provides short-term support, macro oil balance data suggest heavier supply conditions may emerge as early as late Q3. We should anticipate more pressure on the front of the curve, particularly if speculative long positions are reduced ahead of expected inventory increases. Relying on financial flows to prop up crude prices could be risky amid weak physical balances. Markets are influenced by various factors. However, it’s tough to argue for sustained price increases when future balance data is less favorable. As always, we depend on clear supply updates more than temporary demand spikes. Therefore, our strategy should focus on staying flexible and prepared for quick price changes.

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