JPMorgan is making a strong case for energy stocks as higher interest rates continue to restrict capital flow into new supply. While Europe's energy stocks have only gained 10% in contrast to a 30% surge in oil prices, JPMorgan suggests focusing on the majors over midcaps. The bank is upgrading Eni to overweight and reiterating overweights on Shell, TotalEnergies, and Neste. Additionally, Repsol has been raised to a neutral rating.
Recognizing an emerging supply-demand gap beyond 2025 and strengthening sector fundamentals, JPMorgan has upgraded its rating on global energy stocks from neutral to overweight. The key stocks expected to outperform include Eni, Shell, TotalEnergies, Saudi Aramco, Exxon Mobil, Marathon Petroluem, Tenaris, Baker Hughes, Cenovus, Prio, PetroChina, Beach Energy, and Ampol.
The analysts at JPMorgan acknowledge the potential for wider price volatility, concerns around ESG/peak demand, and an effective higher weighted average cost of capital associated with it. However, they do not share the peak demand fears at least until 2030 since the clean energy system is not yet mature enough to meet rising EM-led demand growth. Therefore, traditional fuels are facing increased pressure to bridge the gap. Failure to increase oil and gas capex could lead to energy deficits and acute inflation across the commodities complex.
In conclusion, JPMorgan urges investors to prepare for potential turbulence but remains optimistic about the energy sector's structural up-cycle and the normalization of oil prices.
Multiple Oil-Led Energy Crises Predicted in the 2020s
According to experts, the next decade may witness a series of oil-led energy crises that could be even more severe than the gas crisis Europe experienced in 2022^1^. This situation solidifies OPEC's dominant role in the global oil market, allowing them to capture a larger share of demand growth while helping to stabilize volatile price fluctuations^1^.
Oil Prices: A Key Factor
Interestingly, analysts do not consider oil prices within the $100-to-$120 range to be detrimental to demand. This is because even at these prices, oil’s share of the world economy would remain below 4%^1^.
European Stocks Following Wall Street's Lead
On Friday, European stocks reacted to the sharp decline on Wall Street the previous day. U.S. stock futures indicated a more positive start, but European markets caught up with the downward trend^1^.
- The U.K. FTSE 100 UK:UKX remained flat.
- The German DAX DX:DAX dropped by 0.5%.
- The French CAC 40 FR:PX1 experienced a loss of 0.9%^1^.
Ubisoft Entertainment Gains Momentum
Shares of Ubisoft Entertainment (UBI, +3.55%) surged by 4% as the U.K. competition regulator provisionally approved the Microsoft-Activision deal. This agreement grants the French video game developer cloud rights to Activision's games (ATVI, -0.23%)^1^.
AstraZeneca Makes Groundbreaking Progress
AstraZeneca stock (AZN, +1.71%) witnessed a 2% increase following the announcement by AstraZeneca and Daiichi Sankyo regarding the successful Phase III trial of a breast cancer drug. The trial showed a statistically significant progression-free survival benefit. Dr. Sean Conroy, an analyst at Shore Capital, described it as a pivotal moment for the drug datopotamab deruxtecan. He believes it has the potential to replace systemic chemotherapy for various types of cancers and reassess its safety credentials^1^.
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