- The energy sector has underperformed in 2024, driven by supply management issues and broader macroeconomic weakness.
- The sector is showing signs of recovery, with 2025 oil prices expected to range between $70 and $90 per barrel.
- SA Quant has identified two top Quant-rated energy stocks, with high dividend yields and favorable factor grades, and Quant ‘buy’ recommendations that could benefit in 2025.
- I am Steven Cress, Head of Quantitative Strategies at Seeking Alpha. I manage the quant ratings and factor grades on stocks and ETFs in Seeking Alpha Premium. I also lead Alpha Picks, which selects the two most attractive stocks to buy each month, and also determines when to sell them.
Will the Energy Sector Rebound in 2025?
The energy sector has weathered multiple challenges in 2024, including oil price volatility driven by supply management issues and macroeconomic weakness, contributing to its underperformance in 2024.
However, the sector made gains last week, as the U.S. reported its fifth consecutive weekly draw in crude reserves. Longer-term forecasts suggest the sector’s potential to rebound further in 2025, with crude oil prices projected to remain elevated, ranging from $70 to $90 per barrel. Optimism about the sector is driven by several factors, including higher forecasts for Chinese GDP growth in 2025 and AI’s growing power demands. Ongoing conflict in Ukraine and the Middle East also has the potential to contribute to a supportive environment for oil prices.
The energy sector’s growth prospects for the coming year make it a potentially attractive opportunity for dividend-focused investors. With global demand rising and oil-export countries maintaining production discipline, energy companies can generate substantial cash flows that can offer above-average dividend yields, in addition to capital appreciation.
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