Investing.com — Raymond James analysts provided a cautious outlook for the energy sector in 2025. 

Despite energy’s underperformance over the past two years, the midstream group emerged as a bright spot in 2024, with the Alerian/AMNA index surging 37% and Raymond (NS:) James’ midstream coverage group up 41%.

Geopolitical tensions, such as the ongoing conflict in Ukraine and recent Middle East confrontations, have had little impact on oil market fundamentals. 

“Oil price volatility continues to be driven by rather old-fashioned supply and demand factors,” the analysts note. 

They highlight mixed messages from OPEC and weak demand from China as key contributors to the current market uncertainty. Additionally, the strength of the U.S. dollar, particularly around the U.S. election, is also exerting downward pressure on oil prices.

Looking ahead, Raymond James forecasts West Texas Intermediate (WTI) crude to average $70 per barrel in 2025, slightly above the futures strip, with carrying a $5 premium. 

In contrast, U.S. prices are expected to average $4 per Mcf, significantly higher than current futures prices.

A notable theme for 2025 is the continued impact of artificial intelligence (AI) on the energy sector. 

“AI remains the number-one story in the energy sector,” Raymond James states. “Accommodating this incremental demand will take an all-of-the-above strategy: gas, renewables, and – in certain circumstances, and with very long lead times – nuclear as well.”

“The energy sector currently sits at only ~3% of S&P market cap, but investor sentiment still remains above pre-COVID levels. That being said, near-term uncertainty regarding the commodities (namely oil) has left investors with little conviction at the moment,” concluded the firm.

By Shariq Khan

New York (Reuters) -Oil prices rallied nearly 3% to their highest in three months on Friday as traders braced for supply disruptions from the broadest U.S. sanctions package targeting Russian oil and gas revenue.

President Joe Biden’s administration imposed fresh sanctions targeting Russian oil producers, tankers, intermediaries, traders and ports, aiming to hit every stage of Moscow’s oil production and distribution chains.

futures settled at $79.76 a barrel, up $2.84, or 3.7%, after crossing $80 a barrel for the first time since Oct.7.

U.S. West Texas Intermediate crude futures rose $2.65, or 3.6%, to settle at $76.57 per barrel, also a three-month high.

At their session high, both contracts were up more than 4% after traders in Europe and Asia circulated an unverified document detailing the sanctions.

Sources in Russian oil trade and Indian refining told Reuters the sanctions will severely disrupt Russian oil exports to its major buyers India and China.

“India and China (are) scrambling right now to find alternatives,” Anas Alhajji, managing partner at Energy Outlook Advisors, said in a video posted to social network X.

The sanctions will cut Russian oil export volumes and make them more expensive, UBS analyst Giovanni Staunovo said.

Their timing, just a few days before President-elect Donald Trump’s inauguration, makes it likely that Trump will keep the sanctions in place and use them as a negotiating tool for a Ukraine peace treaty, Staunovo added.

Oil prices were also buoyed as extreme cold in the U.S. and Europe has lifted demand for , Alex Hodes, analyst at brokerage firm StoneX, said.

“We have several customers in the New York Harbor that have been seeing an uptick in heating oil demand,” Hodes said. “We have seen a bid in other heating fuels as well,” he added.

U.S. ultra-low sulfur diesel futures, previously called the heating oil contract, rose 5.1% to settle at $105.07 per barrel, the highest since July.

“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for heating oil, kerosene and LPG,” JPMorgan analysts said in a note on Friday.

Investing.com – Macroeconomic challenges facing commodities in the first three quarters of 2024 have reversed and become tailwinds entering the new year, according to analysts at Wells Fargo (NYSE:).

Elevated interest rates and broader economic uncertainties weighed on commodity prices over the January-to-September period last year, although that trend largely turned around in the fourth quarter, the analysts led by Mason Mendez said in a note to clients published on Monday.

Commodities in general delivered a modest performance in 2024, they said, with the Bloomberg Commodity Total (EPA:) Return Index clocking a 4.5% year-to-date increase as of Dec. 26.

“While supply conditions remained supportive of higher prices, commodity demand was held back by global economic headwinds,” the analysts wrote.

That tepid demand is seen improving in 2025, becoming a possible spark that ignites an uptick in commodity prices, they added. However, they flagged that the supply side “should not be forgotten.”

“After two years of lackluster commodity prices, many commodity producers have slowed production growth,” the analysts said. “This could become a particularly acute point in 2025 in the event that demand recovers at a stronger pace than most expect.”

They noted that new commodity output often lags demand “by months, and sometimes years.”

Among individual sectors, the analysts said they are most keen on precious metals, such as , and energy, with both expected to gain at least 10% in 2025. This would exceed the return the analysts expect from the mid-point of their 250-270 target range range for the broader Bloomberg Commodity Total Return Index.

Gold, in particular, experienced a turbulent end to 2024 due in part to caution around more Federal Reserve interest rate cuts, which contributed to an uptick in nominal and real bond yields that dented the appeal of non-yielding bullion.

Still, the yellow metal jumped by around 27% annually to close out the year at $2,625 per troy ounce, and the prospect of more Fed rate reductions — albeit at a possibly slower pace — could continue to boost its appeal, the Wells Fargo analysts said.

They set a target range for gold prices at $2,700-$2,800 per troy ounce this year.

Energy, meanwhile, is tipped to benefit from greater demand as global economic conditions improve, the analysts forecast. is tipped to be between $85-$95 a barrel, while crude is seen at $90-$100 per barrel. Oil prices dropped by around 3% in 2024, weighed down partly by a sluggish post-pandemic recovery in global demand.