Morgan Stanley Highlights Galp in European Energy Sector

Oil Price Decline: Morgan Stanley Recommends Portfolio Review in European Energy Sector

In anticipation of falling oil prices, Morgan Stanley is advising investors to review their portfolios in the European energy sector. Analysts expect that after 2026, Brent-type crude oil prices will be approximately $70 per barrel. Following this year's price increases, this suggests a possible decline in oil prices. Due to this, Morgan Stanley is adopting a more cautious investment approach toward European energy companies.

Within the framework of this approach, Morgan Stanley has improved its assessment of Portuguese Galp and moved its shares to the "Overweight" category. In simple terms, the bank expects Galp's shares to outperform the market average.

According to analysts' assessments, Galp's position is strengthened by growing oil production, debt reduction, and declining capital expenditures. These factors will help the company maintain attractive dividends for shareholders even in the event of falling oil prices. A possible restructuring of Galp's business is also considered a positive factor.

Morgan Stanley is more cautious regarding Spanish Repsol and Austrian OMV. In Repsol's case, the bank believes that high profits from oil refining are already reflected in the company's share price. Therefore, in the event of falling oil prices, the company could find itself in a less favorable position compared to Galp.

Caution toward OMV is related to existing uncertainty in the chemical products market and expectations regarding the company's new strategy.

According to Morgan Stanley's assessment, in conditions of declining oil prices, energy companies with stable revenues, low costs, and the ability to maintain dividend payments to shareholders will be more interesting for investors.

Source: Investing.com