Crude oil investors are feeling the heat as the post-election rally in risk assets leaves them behind. Piper Sandler warns of an “iffy end to the year and deeply uncertain 2025” for crude oil due to challenging fundamentals of increased supply and slower demand.
The sentiment towards oil is overwhelmingly bearish, with many clients resigned to a bleak outlook for 2025, even in Canada. Prospects for oil demand growth remain dim, while supply is creeping higher in various non-OPEC and OPEC regions.
Piper Sandler notes that although speculative positioning has improved from extreme bearish levels, there is still room for near-term downside risk. The firm estimates demand growth at 1.4 million barrels per day for 2025, contingent on China’s economic recovery and potential rate cuts.
Geopolitical uncertainties, including the Republican sweep of Congress and President-elect Trump’s policies, have pushed the U.S. dollar to new highs, weighing on dollar-denominated commodities like oil. Policy-making in Brussels and Beijing further clouds the economic outlook for oil demand projections.
Analysis:
The outlook for crude oil in 2025 appears uncertain due to a combination of factors such as challenging supply and demand dynamics, geopolitical uncertainties, and policy decisions in key regions. Investors should remain cautious and monitor developments closely to mitigate potential risks to their portfolios.