With much of the global equity space regularly hitting record highs in 2025, allocators might find an upside surprise in one of the worst-performing sectors this year: The oil patch. Historically, classic commodity bull cycles have often begun with precious metals, extended to industrial metals, and then incorporated the energy complex, notes Jay Pelosky, founder and principal at TPW Advisory.
The energy space has been unloved this year, with WTI crude net long positions falling close to record lows, according to the Commodity Futures Trading Commission. That’s with the price of WTI and Brent crude benchmarks already down over 8% and 9%, respectively, in the year through late September.
In the commodity market, stages one and two of have already manifested this year, with precious metals kicking it off. The VanEck Gold Miners ETF (GDX) has jumped almost 100% year-to-date. Some industrial metals have followed, with the Global X Copper Miners ETF (COPX) up nearly 30% in the last three months. The energy complex’s turn could be next.
One trend that may be icing on the cake here is further dollar weakness, as crude is priced in the US currency. The dollar has weakened by almost 10% this year. But this has mostly reflected foreign investors hedging their dollar exposure rather than reducing it, meaning there is room for position reductions. And that could ultimately boost crude prices.
Could unexpected events challenge this outlook? Sure. But with positioning in the oil space so bearish, any bad news may already be in the price.
