Berenberg says that it is time to return to energy sector

18th Sep 2023 11:42

(Sharecast News) - Analysts at Berenberg said the US and European energy sectors could be a way to play the headwinds that they expected to bear down on global equities over the coming quarters.

That was because of the sector's valuation and fundamental support. which they said offered "potential protection" to investors.

Regarding the former, they said that the sector in the U.S. and Europe had de-rated "aggressively" and was trading near 30-year lows in comparison to their respective broader markets.

On the sector's fundamentals, they cited better-than-market free cash flows, surplus FCF yields and stronger balance sheets.

Oil cartel OPEC+ had recently announced more production cuts and was now anticipating a shortfall in supply during the coming quarters.

US oil stockpiles on the other hand were at their lowest ebb since 1985 and a 40-year low in terms of days of supply, while geopolitical tensions might continue to be a key influence on energy markets.

"The team argues it is time to come back to the sector and highlights three key top picks from the European integrated oil space: Shell, Eni and TotalEnergies," they said.

"These stocks also appear on our strategy income screens, updated in this report, as well as US energy stocks such as Chevron and ExxonMobil."