2025 Hedging Survey

Strategies should focus on customer retention and security in an uncertain market

Each April, Oil & Energy looks at the state of the market and talks to experts about pricing and risk management strategies for the coming heating season. And each year, as we put this survey together, we are coming out of a winter season that was fraught with challenges and uncertainties.

This year is no different. The issues the industry has faced over the last few years remain: uncertainty in the Middle East, Russian sanctions and the war in Ukraine, and OPEC+ production restrictions are still in play. On top of those, there are mixed signals coming from Washington. On one hand, production options are being expanded to increase fuel supplies and reduce pricing; but on the other hand, tariffs on products, equipment and, potentially, fuel (as this article was being written) threaten to raise prices for fuels and heating systems.

As we have in the past, Oil & Energy reached out to hedging providers who support the heating fuels market about their thoughts on the current marketplace and expectations for the 2025-2026 season. We would like to thank the companies and their representatives who took the time to participate: Aletheia Consulting Group, Angus Energy, and Hedge Solutions.

Oil & Energy Magazine: What was the biggest surprise of the past year around the oil markets? And what about the oil markets did you forecast correctly?

Angus Energy: We finally had a very cold January and post-election we have had some strong price swings. We do not forecast anything related to prices, weather or basis, but we strongly encourage our clients to be sure to either protect themselves against unwanted outcomes or to be prepared as to what MIGHT happen.

Aletheia: The biggest surprise was that oil lagged equities. Oil did not follow the incredible bull market run that was seen in equities. Looking back to the Silicon Valley Bank failure in March of 2023, many economists were predicting recession and there was even talk of another financial crisis similar to 2008. Fast forward two years and we instead saw one of the greatest bull markets in decades and yet oil did not follow in step. I forecasted correctly that oil had to follow the stock market up and it did but still not to the extent of equities.

Hedge Solutions: There are always surprises. The election result, though not a huge surprise, has definitely introduced a new dynamic that has yet to play out in the oil markets. We don’t forecast prices.

Oil & Energy Magazine: Do you agree with the recent price forecast to average around $74/barrel in 2025 and then drop into the $66 range in 2026?

Aletheia: I do not give much credence to price forecasts but I do utilize technical analysis to initiate my clients’ physical purchases and paper hedges. Having invested thousands of dollars on technical analysis research I have learned that very few can even beat a coin flip. In fact, only a handful of indicators actually increase your likelihood of success.

Hedge Solutions: Prices are very difficult to predict over a short window, never mind a year. There are too many variables that come into play with a commodity like crude oil to think one can forecast with a modicum of accuracy over a long period of time. That said, the supply outlook is positive going forward right now. Both the IEA and the OPEC contingent have forecasted a surplus for both 2025 and 2026. That’s good news for both energy marketers and consumers.

Angus Energy: If that is what the futures markets are saying then it is based on the consensus of available information at that time. No opinion other than it is the consensus.

Oil & Energy Magazine: At what price level would you advise energy marketers to hedge their customers’ programs? And what is, typically, the best time to launch their program offers prior to next heating season?

Hedge Solutions: We like to see the client be consistent with the timing of their offer more than anything. Particularly if they can put an offer out at a lower price than the previous year and still make a good margin. Most of the cap price program offers are wrapped into the budget payment so tying it in with the budget payment renewals is a good time to make an offer.

Angus Energy: Hedging should not be determined by price but by customer demand. Speculating on what the “best price is” or “the best time is” ends up being speculative. We recommend covering (hedging) price risk exposure, but not speculation.

Aletheia: I like to look at the 52 week high and low as a starting point. Next, I will discuss with my clients when they typically go to the street with their offers. Another topic of discussion is what types of price protection offers are being marketed. A pre-buy needs to be timed the best since it is a retailer’s lowest offer. The cap offer has the added benefit of price flexibility since customers can still make out better in the long run, even better than their pre-buy customers. This occurs if rack prices end up lower during the heating season.

Oil & Energy Magazine: What do you tell the energy marketer who thinks the best option for their customers is to take their chances on market prices versus offering price protection?

Angus Energy: I tell them that history dictates that the customers with the greatest amount of “stickiness” are those with Service Contracts, Budget Plans, and Price Protection plans. The Price Protection plans should act as a security blanket for the company and the customers and should protect against what MIGHT happen – similar to a warranty or an insurance policy.

Hedge Solutions: We believe that price protection in the form of a budget cap (not so much as fixed) is a really great retention tool for their customers. Knowing their budget payments will not increase and that the oil price will remain stable or can even drift lower is a winning proposition for the consumer and the energy marketer.

Aletheia: The energy marketer that wants to take their chances has a 50 percent probability of success. My job is to increase the probability of success to a much higher percentage. I tell clients if their customers are content with a floating price then why bother to spend the money on hedging. If customers are not looking for price protection and competitors are not taking customers away from you, then there are other ways to expand your margin outside of price protection programs.

Oil & Energy Magazine: What effect, if any, do you think President Trump’s executive orders and/or policies will have on oil prices and should it impact how you look at hedging?

Aletheia: President Trump’s first four years demonstrated his support for domestic energy production. Already in his second term, he has followed through with the same promise of being pro-energy by opening up government lands to drilling and reducing the red tape on infrastructure projects. This brings government support to U.S. oil producers, thus encouraging them to take advantage of government leases and building pipelines. Better national security and more American jobs is a welcomed development and shift from the prior administration. Regardless of who is in office, hedging needs to be more about strategies than politics.

Hedge Solutions: Though the initial response to Trump’s orders were positive, we have seen another side of it in the form of the tariff threats to Canada and Mexico. We came uncomfortably close to a major price impact by tariffs on retailers last month (January). And we still don’t know how that is going to get resolved. All wholesale wet barrel contracts have a clause that allows for any new taxes, fees, or tariffs to be passed through. Energy marketers will likely need to consider adding the same to their pricing contracts in order to protect themselves.

Angus Energy: It’s a true wild card. In the first few weeks in office, the new Administration levied or threatened to levy tariffs against many countries, including our neighbors to the north and the south. Prices gyrated wildly, given the potential repercussions of higher supply costs (especially to Midwestern refineries). I think that ultimately we need a clear policy that allows for predictable costing, consumer behavior and consumer confidence. Wild swings in prices are not good for the economy and can make hedging a more treacherous endeavor.

Oil & Energy Magazine: Distillate stocks are still at the low end of 5-year averages. Over the last few years, production and supply issues have led to severe backwardation in futures pricing. Do you expect that trend to continue this year?

Angus Energy: Basis widening and blowouts are a big concern for our clients and their hedges are typically indexed to the Merc price, while their supply is more likely impacted by the spot markets. We strongly recommend hedging the basis with either a supplier agreement or a paper hedge of some sort.

Aletheia: A pro-energy administration will encourage ample supply while creating American jobs. As a president who has a tremendous amount of business experience, President Trump understands that low prices are great for the economy but domestic producers (especially shale) have a lot of expenses to keep the wells running profitably. Thus, I see a range that is favorable for the consumer as well as the producer. If prices get too low then watch the strategic petroleum reserve get filled quickly.

Hedge Solutions: Likely, yes. The major issue being the storage factor preventing a large build up in stocks. That said, inventories have held up pretty well in spite of a cold winter thanks to strong refinery runs. Economic factors both in the U.S. and globally will have a hand in determining distillate inventory levels over the spring and summer.

Oil & Energy Magazine: What are the potential outliers or wild cards looming on the horizon that could disrupt the relatively low volatility that we’ve enjoyed the past season?

Hedge Solutions: The usual culprits. Middle East turmoil, economic trends, etc. The wild card will likely be in how the Russian-Ukraine conflict plays out over the next several months. The outcome will have a significant impact on the oil markets. Russia is having a very difficult time finding new ways to get their oil to markets thanks to a new round of sanctions targeting Russian tankers. The result is an estimated 17 million barrels of oil stranded at sea since January. Goldman Sachs has estimated that the number could rise to 50 million barrels in the first half of this year. A settlement with Ukraine could result in the release of Russian crude just as the world is dealing with oversupply. On the other hand, the Trump administration has threatened a harsh response if Russian doesn’t come around. Add in all of the uncertainty around the Trump “tariff mania” and you have a recipe for increased volatility in the coming months.

Angus Energy: President Trump, Russia, Russia-Ukraine, Venezuela, China, Iran, most of the Mideast, rampant inflation, interest rate fluctuations. The list goes on.

Aletheia: Terrorist attack(s) on the United States or specific government officials and/or widespread health concerns. When you make hard decisions that put Americans first you do not win a popularity contest with other adversaries or even allies. As we have already seen, two attempted assassinations on the President can attest to the dangers of this office. Another consideration would be some type of COVID-20, -21 or whatever the next great outbreak will be. Just look back to the past couple years: COVID, quarantines, school closings (kids couldn’t even play sports outside), bird flu, etc. There is only so much you can control but you can prepare ahead of time. Don’t live in fear, just mitigate it!

Oil & Energy Magazine: Do you have any additional comments you’d like to make about the year ahead?

Aletheia: Hedging doesn’t have to be stressful, complicated or expensive. Just make sure you either know what you are doing yourself or you trust someone else who can help you navigate supply and hedging. In this volatile pricing environment, it doesn’t take many bad purchases to hurt your bottom line tremendously.

Angus Energy: Easier to sell a cap when forward prices are discounted to prompt prices (as we see in early February 2025). Volatility might be a calling card of the current administration, so don’t get caught by surprise by big swings. Delivery size surprises can swing calculated K-
factors in a way that leads to very small future deliveries – you need to analyze that before simply following your BOS.

Hedge Solutions: We have a much more positive view of the coming year than we have for quite a while. Talking with clients and people in the industry it feels like the anti-fossil fuel “pressure” seems to be pulling back a bit. Additionally, a really good winter and stable oil prices has everyone in good spirits!

Oil & Energy Magazine: Is your company offering any new products or services for the 2025-2026 season?

Hedge Solutions: We are! We will be introducing a new software application that tracks day to day purchasing and hedging at the rack to retail level. With it we are introducing a new consulting service that focuses on dramatically improving retail margins by lowering their COGS. It will be ready for next heating season and we are very excited about getting it to marketers.

Aletheia: Aletheia is offering a free fuel procurement and fuel hedging assessment for heating oil, diesel fuel, propane, and gasoline marketers. Aletheia Consulting Group is unique since we do not profit from the sale of wet barrels nor from the sale of paper hedges. This reassures our clients that we have no incentive to sell them anything except our knowledge. The wholesale rep works for the wholesaler while the broker works the brokerage. We work for the energy retailer without any commissions or fees outside of our flat fee for service. It is up to our clients who they buy physical product from or whom they trade through. We do not disrupt current relationships; we just come alongside to supplement them on our clients’ behalf. Aletheia provides price discovery, daily market news twice a day, weekly inventory reports as well as any breaking pertinent news. The only cost for Aletheia’s service is a flat fee per year. The energy retailers’ best interest is our best interest.

Angus Energy: We are focused on addressing the concerns of our clients as opposed to coming up with new products to sell. Basis is a concern relative to hedging. Supplemental heating systems are a concern relative to predicting consumption. The availability of data to improve operations has never been greater, but the usage of that data remains woefully low. Our best advice is to have a conversation about what is going on, and to then see if what we offer can be of tangible value.

Our thanks, once again, to this year’s Hedging Survey participants for their time and thoughtful responses: Mark Bloom, Chief Marketing Officer, Angus Energy (mbloom@angusenergy.com, 954-564-7500, ext. 113); Richard Larkin, President, Hedge Solutions (rich@hedgesolutions.com, 800-709-2949); and Mark Skaparas, President, Aletheia Consulting Group (mark@aletheiaconsultinggroup.com, 508-245-2518).

Aletheia Consulting Group: 
Aletheia Consulting Group is a price risk management firm specializing in fuel procurement and hedging. The trading of derivatives such as futures, options, and swaps may not be suitable for all investors. Derivatives trading involves substantial risk of loss, and you should fully understand those risks prior to trading. Any reference to past performance is not indicative of future results.

Angus Energy: 
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The risk of loss in trading commodity interests can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or to authorize someone else to trade for you, you should be aware that you could lose all or substantially all of your investment and may be liable for amounts well above your initial investment.

Hedge Solutions:
The information provided in this market update is general market commentary provided solely for educational and informational purposes. The information was obtained from sources believed to be reliable, but we do not guarantee its accuracy. No statement within the update should be construed as a recommendation, solicitation or offer to buy or sell any futures or options on futures or to otherwise provide investment advice. Any use of the information provided in this update is at your own risk.

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