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.

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 Timothy Gardner, Daphne Psaledakis, Nidhi Verma and Dmitry Zhdannikov

WASHINGTON/NEW DELHI/LONDON (Reuters) -U.S. President Joe Biden’s administration imposed its broadest package of sanctions so far targeting Russia’s oil and gas revenues on Friday, in an effort to give Kyiv and Donald Trump’s incoming team leverage to reach a deal for peace in Ukraine.

The move is meant to cut Russia’s revenues for continuing the war in Ukraine that has killed more than 12,300 civilians and reduced cities to rubble since Moscow invaded in February, 2022.

Ukrainian President Volodymyr Zelenskiy said in a post on X that the measures announced on Friday will “deliver a significant blow” to Moscow. “The less revenue Russia earns from oil … the sooner peace will be restored,” Zelenskiy added.

Daleep Singh, a top White House economic and national security adviser, said in a statement that the measures were the “most significant sanctions yet on Russia’s energy sector, by far the largest source of revenue for (President Vladimir) Putin’s war”.

The U.S. Treasury imposed sanctions on Gazprom (MCX:) Neft and Surgutneftegas, which explore for, produce and sell oil as well as 183 vessels that have shipped Russian oil, many of which are in the so-called shadow fleet of aging tankers operated by non-Western companies. The sanctions also include networks that trade the petroleum. 

Many of those tankers have been used to ship oil to India and China as a price cap imposed by the Group of Seven countries in 2022 has shifted trade in Russian oil from Europe to Asia. Some tankers have shipped both Russian and Iranian oil.      

The Treasury also rescinded a provision that had exempted the intermediation of energy payments from sanctions on Russian banks.

The sanctions should cost Russia billions of dollars per month if sufficiently enforced, another U.S. official told reporters in a call.

“There is not a step in the production and distribution chain that’s untouched and that gives us greater confidence that evasion is going to be even more costly for Russia,” the official said. 

Gazprom Neft said the sanctions were unjustified and illegitimate and it will continue to operate. 

U.S. ‘NO LONGER CONSTRAINED’ BY TIGHT OIL SUPPLY

The measures allow a wind-down period until March 12 for sanctioned entities to finish energy transactions. 

Still, sources in Russian oil trade and Indian refining said the sanctions will cause severe disruption of Russian oil exports to its major buyers India and China.

Global oil prices jumped more than 3% ahead of the Treasury announcement, with nearing $80 a barrel, as a document mapping out the sanctions circulated among traders in Europe and Asia.

Geoffrey Pyatt, the U.S. assistant secretary for energy resources at the State Department, said there were new volumes of oil expected to come online this year from the U.S., Guyana, Canada and Brazil and possibly out of the Middle East will fill in for any lost Russian supply.

“We see ourselves as no longer constrained by tight supply in global markets the way we were when the price cap mechanism was unveiled,” Pyatt told Reuters.

The sanctions are part of a broader effort, as the Biden administration has furnished Ukraine with $64 billion in military aid since the invasion, including $500 million this week for air defense missiles and support equipment for fighter jets.

Friday’s move followed U.S. sanctions in November on banks including Gazprombank, Russia’s largest conduit to the global energy business, and earlier last year on dozens of tankers carrying Russian oil.

The Biden administration believes that November’s sanctions helped drive Russia’s rouble to its weakest level since the beginning of the invasion and pushed the Russian central bank to raise its policy rate to a record level of over 20%. 

“We expect our direct targeting of the energy sector will aggravate these pressures on the Russian economy that have already pushed up inflation to almost 10% and reinforce a bleak economic outlook for 2025 and beyond,” one of the officials said. 

REVERSAL WOULD INVOLVE CONGRESS

One of the Biden officials said it was “entirely” up to the President-elect Trump, a Republican, who takes office on Jan. 20, when and on what terms he might lift sanctions imposed during the Biden era. 

But to do so he would have to notify Congress and give it the ability to take a vote of disapproval, he said. Many Republican members of Congress had urged Biden to impose Friday’s sanctions.

“Trump’s people can’t just come in and quietly lift everything that Biden just did. Congress would have to be involved,” said Jeremy Paner, a partner at the law firm Hughes Hubbard & Reed.

The return of Trump has sparked hope of a diplomatic resolution to end Moscow’s invasion but also fears in Kyiv that a quick peace could come at a high price for Ukraine.

Advisers to Trump have floated proposals that would effectively cede large parts of Ukraine to Russia for the foreseeable future.

The Trump transition team did not immediately respond to a request for comment about the new sanctions. 

The military aid and oil sanctions “provide the next administration a considerable boost to their and Ukraine’s leverage in brokering a just and durable peace,” one of the officials said.