J.P. Morgan bullish on Energy, says Q3 favours Shell over BP

Analysts at J.P.Morgan reiterated their 'bullish' stance for Energy equities, highlighting the expected "pivotal" role that European Union oil majors would play in solving energy security.

On their estimates, they were expected to deliver or sell approximately 10% of the world's energy demand through 2025.

Regarding recent trends, companies' third quarter updates on the rate of change in demand were expected to be in focus, although recent indications were that it was holding firm into autumn with only "isolated pockets" of weakness.

Furthermore, valuations across the space were deemed "attractive", particularly after OPEC+ announced its intention to cut its combined production quotas by two million barrels a day, thus "putting a firmer floor" under crude prices.

They also estimated that share prices in the sector were only discounting a long-term price for a barrel of Brent oil of no more than $60.

"While recent 3Q trading statements revealed mixed operational/trading datapoints, we ultimately expect reporting season to underline that accretive backdrop with 12M rolling [cash flow from operations pre-working capital] set to reach record levels >$250bn."

Nonetheless, they expressed a preference for advantaged upstream/liquid natural gas majors versus shares of more downstream biased midcap outfits.

They also believed the third quarter would favour Shell over BP, while placing Shell and Eni on 'positive catalyst watch'.

Their recommendation for Shell was unchanged at 'overweight', although they trimmed their target price from 3,000.0p to 2,900.0p.

BP on the other hand was unchanged at 'neutral' but they bumped up their target price from 520.0p to 530.0p.