Goldman predicts oil stocks in Europe will shine as crude stays

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MurkyEuropean oil producers’ economical capital spending will benefit the region’s least-loved commodities to a standout accomplishment this year, supported by the biggest quarterly cash generation in six years, based on claims by Goldman Sachs Group Inc.
According to Goldman analysts and Michele Della Vigna in an emailed note, they said all stars were aligned in the first quarter 2017 and they expect 2017 to display the industry at its very best, as we view the year as a standout on a unification of peak development and trough capex.

Even as Royal Dutch Shell Plc, BP Plc, Eni SpA and Total SA announced a jump in first-quarter profits, beating some of the most confident analyst expectations, investors are not yet satisfied. Oil’s retreat this year on interest about increasing U.S. output has changed European oil and gas shares into the poorest performers in the region in 2017, after a 23 percent rally just last year after the OPEC supply cut deal.

The analysts continued and said capital discipline reveals that the European majors are accommodating the New Oil Order and are now growing more profitable and more efficient, despite operating in a lower oil price environment. They said projecting into the second quarter; it was noted that some macro drivers have begun to display signs of weakness.

Declining Brent crude and European gas prices are amongst the main difficulties for second-quarter profits for the sector, while refining boundaries and Henry Hub gas prices remain “robust,” according to Goldman. Among the significant oil companies, Goldman suggests Total, Eni and Shell as top picks and says it is best to sell Statoil because it will be affected the most by lower gas prices.

Investor uncertainty has driven the estimate of the Stoxx 600 Oil & Gas to the highest discount pertinent to European peers since 2015. The sector is below 1.9 percent this year.
Oil is heading for its first weekly increase in a month as OPEC and its allies back prolonging output curbs for an additional six months, Iraq’s Jabbar Al-Luaibi and Algeria’s Noureddine Boutarfa said during a joint news conference in Baghdad on Thursday.