ENERGY FORECAST 2025

In their 2025 Energy Outlook released Thursday, Jefferies analysts identified ten critical issues shaping the global energy landscape, driven by policy changes, market dynamics and geopolitical factors.

“2024 was a rollercoaster year for energy, with broad diffusion being the defining characteristic of the group,” analysts led by Lloyd Byrne said in a note. “We believe 2025 will be a similar year, with U.S. deregulation and rising global demand as the primary drivers of the subsector’s performance.”

1) “Can the ‘Trump Trade’ continue? Jefferies notes that investors expect natural gas (NATGAS) and LNG to benefit from ‘demand stimulation’ under the new administration. Drill Baby Drill is likely to have limited impact as shale plays mature and operators focus on profitability.

The outlook for natural gas infrastructure remains favorable as improvements in permitting and development could spur growth.

In our view, “deregulation is ultimately positive for North American natural gas fundamentals,” the analysts said. “Investors continue to be interested in exploration and production, services and middle-market development options.”

2) “North American Natural Gas – Volatility, LNG and Demand Hubs:” LNG demand is expected to cause gas storage overflow in the winter of 2025-26. Jefferies expects infrastructure bottlenecks to lead to price fluctuations as demand outstrips supply. Appalachia and Haynesville could benefit from increased demand for electricity and data centers.

3) “Global Oil Macroeconomics: Supply, Politics, and Iran vs. Demand:” Jefferies expects non-OPEC+ supply growth to match global demand growth in 2025.

China and India are expected to contribute significantly to demand growth. However, geopolitical risks surrounding Iran could disrupt markets as potential U.S. sanctions on Iranian exports could impact supply.

“Any decline in Iranian exports will likely be offset by an increase in OPEC+ supply, partially reducing excess spare capacity,” the analysts add.

4) “The Future Role of U.S. Oil: Maturity or Shale Growth?” Sentiment on oil is “more negative than ever,” according to the CFTC’s positioning. While oversupply remains a concern, Jefferies sees potential stabilization if Iranian barrels are removed from the market. US production growth is slowing as attention turns to shareholder returns.

5) “LNG Outlook: Has the oversupply thesis shifted to the right?” According to a Jefferies report, LNG inventories are shrinking due to project delays and higher-than-expected demand.

The investment bank highlights the possibility of higher prices driven by gas demand in Europe and Asia. After 2025, additional supplies from the US, Qatar and Canada could weaken the market.

6) “Global Refining Supply: What Happened to Higher Mid-Cycle Prices?” Jefferies expects global refining supply and demand (S&D) to decline slightly in the second half of 2025. Capacity closures in the Asia-Pacific region will offset capacity additions, leading to a tighter net output balance.

7) “Energy Mergers and Acquisitions: Where Are We? Consolidation in the exploration and production sector continues and there is room for more activity. Jefferies believes capital optimization and mature basin restructuring will create growth opportunities in the midstream and oilfield services sectors.

8) “Midstream: Still a Lot of Interest – Is It Still a Safe Haven? Midstream remains a defensive stock amid strong growth in LNG volumes and energy demand. Jefferies highlights infrastructure projects in key basins such as the Permian and Appalachia as drivers of enduring interest in the sector.

“We expect the midstream sector to continue to attract investor attention as a way to invest in volume growth while limiting exposure to early-month price volatility due to storage constraints in North America as production continues to increase,” Jefferies analysts said.

9) “Shipping: Will the US enforce sanctions against Iran more severely? Jefferies notes that US sanctions on the “shadow fleet” are a key issue. Tougher sanctions could push tankers out of the market, causing spot rates and cargoes to rise.

“If the 85 very large product tankers (VLCCs) on the watchlist were removed from the market with stricter enforcement, we could see overall tanker occupancy rise from 85% to 95%, driving up VLCC spot rates and tanker rates overall,” the report says.

10) “International capital investment: Will it live up to expectations? Offshore capital investment is expected to increase in 2025, albeit at a slower pace. Investors fear a slowdown in growth, but Jefferies expects further gains driven by global energy demand.