Morgan Stanley revises ratings on European oil and gas stocks

Investing.com -- Morgan Stanley (NYSE:MS ) has revised its ratings on several European oil and gas companies, reflecting a mixed outlook for the sector in 2025. 

Analysts raised their overall industry view to "in-line" from "cautious,” citing compelling valuations after a period of underperformance in 2024. 

However, the adjustments highlight a nuanced landscape, with differing prospects for companies and commodities.

The analysts upgrade Shell (LON:SHEL ) and Equinor to “overweight”, emphasizing Shell’s financial resilience and Equinor’s strong position in the gas market. 

Meanwhile, TotalEnergies (EPA:TTEF ) and Eni were downgraded to “equal-weight,” reflecting concerns about free cash flow shortfalls and lower distribution yields. 

Repsol (OTC:REPYY ) saw its rating lowered to "underweight" due to weaker refining margins and limited cash flow growth potential.

Morgan Stanley notes that while gas markets look robust, the oil market appears well-supplied, with OPEC+ interventions preventing price declines but not eliminating surplus risks. 

The analysts forecast Brent prices to hover around $70 per barrel in 2025, a level unlikely to sustain major gains or losses.

European gas markets are more promising, bolstered by strong global LNG demand, particularly from Asia, and tighter inventories in Europe. 

However, the analysts also warned of potential headwinds, including reduced shareholder distributions across most companies in the sector due to lower free cash flow, with Shell being the notable exception.

Source: Investing.com