Royal Dutch a top-pick for UBS after oil hits bottom

With oil prices having possibly hit bottom in the first quarter of the year, investors would need to carefully watch European oil majors's progress on their cost and investment targets and any changes to targets or guidance, UBS said.

Any of the latter would arguably be arriving close on the heels of those companies' formal strategy updates delivered together with their latest full-year numbers, analyst Jon Rigby said in a research note sent to clients.

However, with oil prices rising past earnings would perhaps be regarded "as not much more than a historic curiosity", he added.

From a fundamental perspective, investors needed to as themselves if shares on both sides of the Atlantic were now fully-priced for a better operating environment or whether further upside existed as a result of better underlying profits and cash-flows or improved capital allocation.

Against that backdrop, "company tone and messaging will be very important in how share prices react," Rigby believed.

On his estimates, the European sector was pricing in an oil price of $53.0 per barrel (Brent) and the US majors $74.0 per barrel (WTI).

Rigby said his top picks were Royal Dutch Shell and Eni. In the same note, he cut his recommendations on GALP and MOL to 'neutral' - following their strong performance year-to-date while upping his target price for Repsol to €11.50.

"Our preference is for oil price leverage by way of a high-quality upstream business married with low levels of financial gearing."