Investing.com — In its report ‘Energy Outlook to 2025.’ published on Thursday, Jefferies analysts highlighted ten key issues shaping the global energy landscape, driven by policy changes, market dynamics and geopolitical factors.
“2024 was a rollercoaster year for energy, with significant dispersion defining the group,” analysts led by Lloyd Byrne said in a note. “We believe 2025 will be similar, with US deregulation and growth in global demand as the primary drivers of sub-sector performance.”
1) ‘Can “Trump Trade” Continue?:’ Jefferies notes that investors expect (natgas) and LNG to benefit from “pullback in demand” under the new administration. “Drill Baby Drill” is likely to have limited impact as shale matures and operators focus on recovery.
The outlook remains bullish for natural gas infrastructure as better permitting and development could spur growth.
“Deregulatory pressure is ultimately positive for North American natural gas fundamentals, in our view,” the analysts noted. “Investors continue to inquire about upstream, services and midstream opportunities to consider.”
2) ‘North American Natural Gas – Volatility, LNG and Demand Centers:’ LNG demand is expected to reduce gas storage towards the winter of 2025-26. Jefferies predicts infrastructure bottlenecks are creating price swings as demand outstrips supply. Appalachia and Haynesville are positioned to benefit as demand for power and data centers grows.
3) ‘Global oil Macro (BCBA:): Supply, Politics and Iran vs. Non-OPEC Demand:’ Jefferies predicts that non-OPEC+ supply growth in 2025 will match global demand growth.
China and India are projected to contribute significantly to demand. However, geopolitical risks surrounding Iran could disrupt markets, with possible US sanctions on Iranian exports affecting supply.
“Any reduction in Iranian exports is likely to be offset by an increase in OPEC+ supply, partially alleviating excess spare capacity,” the analysts added.
4) ‘The Future Role of US Oil: Maturity or Shale Growth?:’ Oil sentiment is “as negative as ever” based on the CFTC’s positioning.
While oversupply remains a concern, Jefferies sees potential stabilization if Iranian barrels are removed from the market. Manufacturing growth in the US is slowing, and the focus is shifting to shareholder returns.
5) ‘LNG Outlook: Oversupply Thesis Pushed to the Right?:’ According to a Jefferies report, LNG balance sheets are shrinking due to project delays and higher-than-expected demand.
The investment bank highlights the potential for higher prices, driven by European and Asian demand for gas. After 2025, additional supply from the US, Qatar and Canada could ease the market.
6) ‘Global Refinery S&D: What Happened to the Upper Midcycle?:’ Jefferies expects global refining supply and demand (S&D) to ease slightly in the second half of 2025. Capacity closures across the Asia-Pacific region will offset additions, leading to a tighter clean product balance sheet.
7) ‘Energy mergers and acquisitions: what inning are we in?:’ Consolidation within the E&P sector continues, with room for further activity. Jefferies sees opportunities for midstream and oilfield services to follow suit, driven by capital optimization and mature basin restructuring.
8) ‘Midstream: Still lots of interest – remains a safe haven?:’ Midstream remains a defensive play, with strong volume growth from LNG and electricity demand. Jefferies highlights infrastructure projects in key basins such as the Permian and Appalachia as drivers of sustained interest in the sector.
“We expect midstream to continue to attract investor attention as a way to invest in volume growth while limiting exposure to price volatility in the first month due to limited North American storage as production continues to rise,” Jefferies analysts noted.
9) ‘Delivery: Will the US enforce sanctions on Iran more strictly?:’ Jefferies identifies US “shadow fleet” sanctions as a key issue. Stricter enforcement could remove tankers from the market, increasing spot rates and utilization.
“If the 85 very large crude carriers (VLCCs) on the watch list are removed from the market under stricter measures, we could see overall tanker utilization jump from 85% to 95%, causing a jump in spot rates for VLCCs and tankers in general,” it said. in the report.
10) ‘International capital expenditure – will it live up to expectations?:’ Offshore capital investment is forecast to grow in 2025, albeit at a slower pace. Investor concerns remain as growth slows, but Jefferies expects incremental increases driven by global energy demand.
