Energy stocks have rarely strayed from the limelight in 2024 that’s been packed with volatility, but it appears that investments in oil could be set to grow throughout the year ahead due to conflict in the Middle East and Trump’s return to the White House.
Although a tentative deal was struck between attendees at the recent COP29 conference in Baku, Azerbaijan, it appears that the appetite for natural gas is only set to grow into the new year.
Findings by the International Energy Agency (IEA) anticipated global demand for natural gas to grow more than 2.5% in 2024, with similar figures projected for 2025. Even at a time when fuel prices are in a state of volatility, these expectations for greater demand over the months ahead place energy stocks in good stead for investors.
Oil stocks have been steadily rising in the US even before Trump takes office. Backed by a drop in domestic crude inventories, even uncertainty over Federal Reserve interest rate cuts couldn’t prevent Brent futures from rising to $73.72 per barrel with US West Texas Intermediate crude jumping to $70.62.
Geopolitics Presents New Opportunities in Oil
Many geopolitical factors are at play that impact the value of oil stocks. Conflict in the Middle East is prompting significant levels of price volatility within the sector, continuing a trend that’s been fluctuating since Russia’s invasion of Ukraine in 2022.
With every escalation sending prices higher, the cost of oil could be damaging for global economies looking ahead, but from the point of view of the investor, there could be a number of opportunities to be found throughout international oil stocks in the new year.
Oil stocks appear set to flourish as President-elect Donald Trump enters his second term in the White House. The climate change skeptic’s ‘drill baby, drill’ mantra is expected to resonate for domestic energy stocks, of which oil and gas are set to be the big winners.
Trump’s policies will not only open the door to more fossil fuel usage in the United States, but his focus on deregulation could see leading domestic energy companies grow during his second term.
Recently, Trump pledged to offer expedited approvals and permits, including all environmental approvals, to anybody willing to invest more than $1 billion in the country. The ramifications of this could lead to new drilling projects and infrastructure development throughout traditional energy sectors.
Investors May Find Value in the Middle East
Trump’s accommodating stance towards oil and gas production may lead to rapidly expanding industry use cases domestically, but extra supply from drilling could ultimately push prices lower, damaging the growth prospects of energy stocks.
Additionally, the President-elect’s plans to implement tariffs on trade with nations like China, Mexico, and Canada may slow the US economy, dragging crude prices even lower.
Analysts at Citi have forecasted that the resounding election victory for Trump and the Republican party is likely to be net bearish for oil stocks, and have projected Brend crude prices at $60 per barrel for 2025, a price that falls considerably lower than today’s figures.
This means that investors seeking value in energy stocks may have to look further afield for the best opportunities.
With the UK government raising energy profits levy from 35% to 38% in its recent budget, and with similar windfall taxes in place throughout the European Union, it’s the Middle East that could provide the best exposure to higher yields for investors seeking to get the most out of their portfolios in 2025.
As scarcity in the wake of conflict is the most likely driver of oil stock growth in the year ahead, all eyes will be on the Strait of Hormuz and any prospective disruptions in trade.
In October, escalating tensions between Israel and Iran saw traders bet on $100 oil prices per barrel, pushing Brent crude oil wagers higher.
Although markets have since calmed, the best stocks to invest in for speculative investors are more likely to be found in Saudi Arabia with the likes of Aramco (TADAWUL: 2222), and the United Arab Emirates with ADNOC Distribution (ADX: ADNOCDIST).
However, exposure to Middle Eastern oil stocks can be found more locally, too, with Gulf Marine Services (LON: GMS) on the London Stock Exchange. GMS provides propelled self-elevating support vessels in the Middle East and includes contract work for key clients like ADNOC, Saudi Aramco, and Qatar Energy. This means that growth in the energy sector can directly benefit Gulf Marine Services moving forward.
Adapting to the Unpredictability of Oil
For investors seeking to navigate the volatility and unpredictability of oil prices in an increasingly confusing geopolitical landscape, it’s imperative that an adaptable approach is adopted.
World news events are continually having a significant impact on the price of oil and related stocks, and this calls for a strategy that can be quickly altered should changes occur unexpectedly.
By thoroughly researching and auditing positions, it’s possible to access high yields in 2025 from oil stocks that have plenty of room for growth. But be wary of unpredictability, the geopolitical landscape and energy sector appear set to remain volatile long into the future.
