Piper Sandler on why oil markets do not share the bubbly optimism of stocks

Investing.com -- Oil markets have been left in the dust of the post-election surge in risk assets as  challening fundamentals of increased supply and slower demand point to an "iffy end to the year and deeply uncertain 2025 for crude, Piper Sandler said in a recent note.

"We have not met anyone bullish oil. In talking with numerous clients we encounter sullen resignation about the bearish outlook for 2025, even in Canada," Piper Sandler said.

Prospects for oil demand growth remain rather dim,  it added. On the supply side, meanwhile, there are "umpteen places from which supply is creeping higher – including non-OPEC and the core of OPEC."

While speculative positioning has moved closer to neutral from the extreme bearishness seen in late September, there is still room for near-term downside risk, Piper Sandler said.

For 2025, Piper Sandler estimates demand growth at 1.4 million barrels per day. That is double the rate of growth seen this year, but this "forecast hinges on China's economy picking up and rate cuts spurring a cyclical upturn," it added.

As well as challenging supply and demand backdrop, geopolitical uncertainties are further muddying the outlook for oil. 

The Republican sweep of Congress and President-elect Trump's "America First" stance have driven the U.S. dollar to new highs, which typically weighs on  dollar-denominated commodities including oil. 

Piper Sandler also notes that policy-making in Brussels and Beijing is not particularly inspiring, further clouding the economic outlook that underpins oil demand projections.

Source: Investing.com