By Staff Reporter
Raymond James analysts have issued a cautious forecast for the energy sector in 2025. Despite a lackluster performance over the past two years, the midstream sector showed promise in 2024, with the Alerian/AMNA index climbing 37% and Raymond James’ midstream coverage group rising by 41%.
Geopolitical tensions, including the ongoing conflict in Ukraine and recent clashes in the Middle East, have had minimal impact on the fundamentals of the oil market. The analysts emphasize that “oil price volatility continues to be influenced by traditional supply and demand dynamics.”
Analysts at Raymond James point to mixed signals from OPEC and weak demand from China as major factors contributing to the current market uncertainty. They also note that the strength of the U.S. dollar, especially in the lead-up to the upcoming U.S. election, is putting downward pressure on oil prices.
Looking ahead, Raymond James projects that West Texas Intermediate (WTI) crude will average $70 per barrel in 2025, slightly above the futures strip, while Brent crude is expected to carry a $5 premium.
In contrast, U.S. natural gas prices are anticipated to average $4 per Mcf, significantly higher than current futures prices.
A significant theme for 2025 is the ongoing influence of artificial intelligence (AI) on the energy sector. Raymond James emphasizes that “AI remains the number-one story in the energy sector.” They add that meeting this growing demand will require a comprehensive approach, utilizing gas, renewables, and, in some cases with long lead times, nuclear energy.
Currently, the energy sector represents only about 3% of the S&P market cap, yet investor sentiment remains higher than pre-COVID levels. However, the near-term uncertainty surrounding commodities, particularly oil, has left investors lacking conviction for the time being, according to the firm.
