Barclays has adjusted its Brent crude oil forecast to US$72 per barrel for 2025, with a projection of $70 for 2026. The bank predicts US oil demand will increase by 130,000 barrels per day this year, surpassing their earlier estimates by 100,000 barrels per day.

Geopolitical tensions have decreased due to a U.S.-mediated ceasefire between Israel and Iran, which remains in effect. Consequently, the risk premium has dissipated, and recent price movements indicate improved fundamentals.

Brent Crude Forecast Update

The revised outlook from Barclays, cutting its Brent crude forecast to $72 in 2025 and $70 in 2026, reflects a clearer supply-demand dynamic amid reduced geopolitical anxiety. The upward revision to U.S. demand — now expected to grow by 130,000 barrels per day rather than the previously estimated 30,000 — highlights continued activity in key consumption sectors, especially transportation and manufacturing.

With tensions between Israel and Iran easing following ceasefire negotiations, immediate concerns over sharp supply disruptions have faded. This has stripped away some of the risk premium that had previously supported higher prices. As a result, recent price action is now more aligned with underlying fundamentals like refinery utilisation rates, inventory draws, and shipping flows, rather than speculation or risk hedging.

We interpret this realignment not only as a softening of upside volatility but also as a message that supply buffers and available spare capacity are in slightly better health than previously assumed. It may be helpful to monitor physical crude differentials and product crack spreads at this point, especially in Atlantic Basin markets, to confirm whether implied marginal balances are actually tightening or just stabilising.

Market Positioning And Volatility

From a volatility standpoint, the options market has seen a reduction in implieds across most tenors. Calendar spreads, particularly Dec-Dec structures, are now less skewed towards backwardation — a development consistent with easing prompt pressure. That said, cross-month spreads in the front of the curve are still likely to see congestion due to refinery maintenance and refinery turnarounds ahead of autumn.

We should also pay attention to large commercial positioning, which has started to unwind some of the defensive longs placed at the height of Middle Eastern uncertainty. In the futures curve, this is beginning to manifest in slightly lower passive flow, though not enough yet to reverse the broader trend.

The key takeaway, based on the updated forecast and inferred physical signals, is that market pricing is starting to reflect more neutral conditions. This means more measured curve structures and less urgency in directional trades tied to macro hedges. Volatility sellers will now find better premiums only around data points and inventory weeks, rather than from persistent geopolitical swings.

For spreads traders, the next few weeks may offer opportunities through relative value trades across crude grades subject to Atlantic versus Pacific flows, especially if we continue to see narrow WTI-Brent spreads. Keep in mind, refinery run cuts in Asia might get offset by increasing runs in the West, which could lead to small contango creep at the front end.

With the macro volatility now dampened, and demand trends more transparent, the timing of any hedging needs to be far more deliberate. We should respond to inventory cycles, shipping disruptions or unexpected refinery outages — not anticipation of headlines that may never materialise.

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