Smart Hedging in a Softening Market
October 24, 2025
Written By Tim Danze
Citi analysts forecast the Brent crude oil futures price will fall to $60 per barrel by year-end and average $62 per barrel between the second and fourth quarters of 2025. The bank attributes its bearish outlook to rising OPEC+ production and continued Chinese stockpiling.
Citi revised its global liquids balance outlook after OPEC+ announced plans to unwind an additional 1.63 million barrels per day of voluntary cuts starting in October 2025, adding slack to an already loosening global supply. By the end of 2026, Citi estimates global liquids inventories could rise to 10.96 million barrels, equivalent to 103 days of forward demand cover.
Under Citi’s base case, oil prices remain under pressure. The bank assigns a 30% probability to Brent crude falling below $60 per barrel, possibly dipping to $50, due to weaker global demand, faster growth in non-OPEC supply and lower compliance among OPEC+ members. Its bullish scenario, given a 10% probability, would see prices above $75 per barrel if geopolitical disruptions escalate.
Other major institutions, including JPMorgan, Goldman Sachs and the U.S. Energy Information Administration (EIA), share similar expectations for stable to lower prices through next year.
A Fragile Calm
With so many forecasts pointing toward cheaper oil, it’s tempting to relax and enjoy the relief at the pump. However, history shows that stable outlooks can change quickly. Refinery outages; sanctions-related supply constraints, particularly involving Russia; and renewed demand growth in China and India could all push prices higher. On the downside, additional OPEC+ supply, economic uncertainty, and continued adoption of renewables and biodiesel could further weigh on prices.
Crude oil futures markets are inherently forward-looking, as traders constantly scan the horizon for value opportunities. Since late June, WTI crude oil has traded in a narrow band between $62 and $70 per barrel, and the forward curve through 2026 remains relatively flat. If front-month crude slips below $60, that could spark renewed buying interest among traders.
Season Considerations
Even amid global shifts, seasonal trends continue to influence price movements. Unless there is a significant disruption (such as war), we are likely to see a winter dip in pricing.
Diesel and gasoline futures have also traded in tight ranges since June and typically soften during the winter months. November through February often presents the best window to consider price protection for the year ahead.
Traders are eyeing $2.10 per gallon for NYMEX Heating Oil and $1.80 per gallon for NYMEX RBOB (gasoline) as levels where buying interest could pick up. These prices could serve as reasonable targets for securing fuel cost protection into 2026.
Planning Ahead
With all the uncertainty around the globe, from war risks to shifting production targets, the prudent thing to do is to take some modest price protection for your key usage months. Booking a conservative number of gallons can help even out your overall costs if price spikes materialize. At this point, diesel appears to be the product most vulnerable to supply tightness as 2025 winds down and we head into 2026.
Looking further out, the current bearish outlook for 2026 could present an opportunity to plan ahead for early 2027. If crude oil hits $50 per barrel in 2026, that would be an ideal time to secure price protection for key months in 2027. Perhaps you cover the spring months, from March through May, and then the fall, from August through October.
While no forecast is guaranteed, the consensus of lower prices offers both relief and opportunity for those prepared to act when the market shifts.