Oil Prices Fall for the Second Consecutive Year: ETFs in Focus
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Oil prices fell by about 3% in 2024, marking the second straight annual decline as the global post-pandemic demand recovery faltered. The contributing factors included China’s struggling economy and increased crude output from the United States and other non-OPEC producers, which kept the global market well-supplied.On the last trading day of the year, Brent crude futures closed at $74.64 per barrel, finishing the year down roughly 3% from the 2023 closing price of $77.04. U.S. West Texas Intermediate (WTI) crude ended at $71.72 per barrel, nearly flat with last year's closing settlement.Market Trends in 2024In September, Brent futures dipped below $70 per barrel for the first time since December 2021, reflecting a broader cooling of oil prices as the demand surge following the pandemic faded. The market also absorbed the diminishing price impacts of the 2022 Russia-Ukraine war.2025 Oil Price OutlookWeak Chinese Demand and Rising SuppliesA Reuters poll forecasts oil prices to hover around $70 per barrel in 2025, citing weak demand from China and growing global supplies, as quoted on Yahoo Finance. These factors are expected to counterbalance OPEC+ efforts to stabilize the market.Revised Demand Growth ProjectionsThe Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both reduced their oil demand growth forecasts for 2024 and 2025 due to a weaker Chinese outlook. The IEA forecasts a market surplus by 2025, despite OPEC's decision to postpone output increases until April 2025.EIA expects the Brent crude price to be $74 per barrel in 2025, roughly the same as in 2024.Record-high U.S. production also led to a rally in prices. In October 2024, U.S. oil production reached a record 13.46 million barrels per day (bpd) and is projected to climb to 13.52 million bpd in 2025, according to the U.S. Energy Information Administration (EIA).Fed’s Interest Rate PathInvestors are monitoring the Federal Reserve's 2025 interest rate outlook, with a slower rate-cut path expected due to persistent inflation. Lower interest rates typically boost economic growth, fueling energy demand.Potential Geopolitical ImpactsThe incoming Trump administration may implement policies that could affect the oil market. These include potential tighter sanctions on Iranian oil, a proposed ceasefire in the Russia-Ukraine war, and the "maximum pressure" approach toward Iran, which could tighten global supplies.Factors Drawing a Silver LiningEconomic Stimulus in ChinaThe Politburo, the Communist Party’s 24-member governing body led by President Xi Jinping, announced that it will now adopt a “moderately loose” monetary policy — a term China last used in 2010 when it sought to support a recovery from the global financial crisis.China’s manufacturing sector grew for the third consecutive month in December 2024, albeit at a slower pace, as government stimulus measures supported the world's second-largest economy. If China eases its monetary policy materially, the demand outlook could improve and oil prices may see a surge. However, other factors do not appear favorable for a sustained oil price rally.Middle East TensionsOil prices received a boost from U.S. military strikes against Houthi targets in Yemen. The Iran-backed group has been disrupting commercial shipping in the Red Sea, aggravating concerns about global oil flow security amid the ongoing geopolitical conflicts.Oil ETFs in FocusAgainst this backdrop, investors can keep a track of the oil-based exchange-traded funds (ETFs). These ETFs include United States Oil Fund LP USO, Invesco DB Oil Fund DBO, ProShares K-1 Free Crude Oil ETF OILK and United States 12 Month Oil Fund LP USL. Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco DB Oil ETF (DBO): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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