HSBC has revised its oil stock ratings, upgrading BP and TotalEnergies to Buy, reflecting a more optimistic outlook on commodity prices and sector earnings. The bank retained Shell and Chevron as Buy ratings, while downgraded OMV to Reduce. The changes stem from updated forecasts for Brent crude and natural gas prices, alongside revised earnings and cash-flow projections for the energy sector.
HSBC raised its 2026 Brent crude price assumption to $90 per barrel, up from $80, and its 2027 forecast to $85, from $65. The revision reflects expectations of a gradual recovery in Strait of Hormuz flows. For natural gas, the bank increased its 2026 second-half TTF price forecast to $22.5 per million British thermal units, from $16.7, and its 2027 forecast to $17, from $12. These adjustments translate into broader sector-wide earnings-per-share (EPS) and cash-flow-per-share estimates, with averages rising by 19% for 2026, 65% for 2027, and 33% for 2028, and cash-flow increases averaging 12%, 30%, and 14% respectively. The revisions are particularly pronounced for international majors, benefiting from their diversified upstream, refining, and trading operations.
BP’s price target was raised to 640 pence from 570 pence, implying an 18% upside. The bank argues that BP’s shares trade at a 26% discount to 2027 EV/DACF compared with Shell and TotalEnergies, with HSBC’s target assuming this gap narrows by half. The upgrade also reflects reduced strategic pressure on BP to divest assets, as deleveraging efforts are expected to rely less on asset sales in a higher oil-price environment. Analysts caution that BP may not resume share buybacks before 2028, unless management adopts a more lenient definition of gearing.
TotalEnergies saw its price target raised to €93 from €80, corresponding to an 18.4% upside. The upgrade stems from a perceived valuation premium to Shell diminishing and potential increases in buyback activity. Chevron’s price target was also raised to $250 from $218, with HSBC expecting its annual buyback run rate to rise to $15 billion, up from $10–12 billion. Chevron is noted for having the lowest Middle East exposure among the five supermajors.
Shell and Repsron remained rated Buy, while Eni, Equinor, Galp, and ExxonMobil were retained at Hold. Eni’s valuation was deemed fairly justified following strong year-to-date performance, making its shares appropriately valued. OMV was downgraded to Reduce. Overall, HSBC assumes higher shareholder distributions from most companies, except Exxon and BP, with revised targets implying a 12% average sector-wide upside and 21% for Buy-rated names.
