Cloudy outlook for energy sector in 2025

Conflicting factors on both the supply and demand side have created an uncertain outlook for the energy sector, says Daniel Greenspan, senior analyst and portfolio manager at CIBC Asset Management.

“While tariffs may slow economic growth and energy demand, some of that could be offset by stimulus in various countries that could boost demand,” he said in an April 3 interview.

For instance, he said that while China has been a reasonable source of oil demand growth, that growth could slow this year. But domestic stimulus could offset some of the slowdown.

“There’s also potential in India and other emerging markets to pick up some of the slack and support the oil market on the demand side,” he said.

Listen to the full conversation on the Advisor to Go podcast, powered by CIBC Asset Management.

On the supply side, he noted that OPEC+ is planning to bring back some of the supply it cut, starting this month.

“We’re expecting 138,000 barrels a day to be added by OPEC in April, with the group targeting the return to the full 2.2 million barrels per day that are currently held off the market to be back by late 2026.”

Both Canada and the U.S. could see modest supply growth this year, he added. While Canada has the pipeline capacity to fill its Trans Mountain pipeline expansion, U.S. producers will remain focused on capital discipline and returns to shareholders via dividends and buybacks.

According to Greenspan, natural gas remains a bright spot. “We’re increasingly constructive on the outlook for natural gas, as we expect demand across North America will grow, with more LNG growth, more coal-to-gas switching, and incremental power demand coming from AI and data centre buildouts across North America.”

Canadian companies are in good shape to weather a potential storm, he added, pointing out that if oil prices hold, Canadian companies would still generate strong free cash flow to maintain operations and capital expenditures. And if oil prices drop, he doesn’t expect Canadian companies to become stressed.

“There’s room to slow down or stop on buybacks, [and] reduce operating costs and CapEx to bring costs down,” he said.

When it comes to stock picks, Greenspan likes Canadian Natural Resources and ARC Resources. Both companies have solid management and balances sheets, and he expects each to return strong free cash flow to shareholders.

Greenspan also likes midstream companies like Enbridge and TC Energy.

“[Enbridge’s] valuation has room to grow as milestones at projects are met, and the new gas utilities it bought last year are integrated into the business,” he said. “[TC Energy] has a reasonable pipeline of capital projects that can support growth over the medium term.”

One challenge for Canadian energy is building more large-scale infrastructure projects, like a pipeline to B.C.’s northern coast, or from Alberta to the East Coast, he noted.

“For now, Canadian oil exports remain tied to the U.S., with limited other outlets for our barrels. But overcoming some of [the] regulatory and legal challenges could change that dynamic in the years ahead,” he said.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.