JPMorgan sees resilience across European oil majors even as an expected oversupply weighs on the macro backdrop, with Shell (AS:SHEL) and Repsol (BME:REP) standing out as the bank’s preferred picks.
The bank projects more than 2 million barrels per day of excess supply from the fourth quarter as OPEC+ unwinds quota cuts.
Against this backdrop, it assessed cash breakevens, gearing and distribution capacity, concluding that “dividends are secure down to $50/bbl, pre-capex flex”.
Sector-wide, JPMorgan analysts estimate a 6.1% forward dividend yield is funded, though distributions are set to rebase around 20% below 2024 levels as variable buybacks absorb the adjustment.
Shell remains JPMorgan’s top pick, underpinned by what the analysts call “a superior barbell of leverage and resilience.”
The company offers top quartile breakeven coverage, with dividends funded down to $40/bbl, and benefits from a market-leading integrated gas and LNG business set to expand further into 2026–27.
JPMorgan raised its price target to 3,100p, implying about 19% upside.
Repsol is flagged as the prime beneficiary of diesel market tightness, with the analysts highlighting its “>50% middle distillate yield” provides a strong oil price hedge.
The Iberian refiner also stands to gain from OPEC+-driven crude spread widening. A 6.7% dividend yield and relatively low forward valuation leave scope for a further re-rating, according to the note.
Repsol remains on JPMorgan’s Positive Catalyst Watch into third-quarter reporting.
Other Overweight-rated names include Eni (BIT:ENI) and TotalEnergies (EPA:TTEF). JPMorgan flags Eni’s “step change in execution” that strengthens the floor under cash returns, supported by divestments and upstream growth.
For TotalEnergies, the focus is on re-establishing fiscal competitiveness through deleveraging and disciplined capex, with a 2026 dividend yield of nearly 7%.
Both names are seen within the second tier, benefiting from notable breakeven rate of change opportunities.
In contrast, Equinor (OL:EQNR) and OMV (VIE:OMVV) are underweight. The analysts warn that Equinor’s free cash flow and gearing compression “diminishes 2026+ total shareholder return (TSR) headroom and amplifies reliance on EU gas pricing.”
OMV’s transformational BGI transaction secures a distribution floor, but meaningful upside depends on a recovery in the chemicals cycle, which the bank sees as a longer-term prospect.
JPMorgan also models cash return scenarios across oil price decks, noting that at $65 Brent a 2026 distribution equates to “a still competitive 10.4% cash yield,” while sensitivity is about 100 basis points per $10 move in prices.
Sector valuation screens as “nearer fair than outright cheap territory” at current levels, with an 8.8% forward free cash flow yield broadly in line with long-term averages.
Source :
https://www.investing.com/news/stock-market-news/eu-oil--gas-jpm-says-these-stocks-are-best-placed-as-oil-oversupply-looms-large-4250903
