TotalEnergies Favored by BofA Amid Thin Refining Margins

Analyst Highlights TotalEnergies as Margins Decline

Bank of America has identified TotalEnergies as a preferred stock among European oil majors as the sector faces significant pressure from declining refining margins, which have fallen by over 45% since the fourth quarter of last year.

European Refining Market Overview

European refining margins have seen a sharp downturn, averaging approximately $7.5 a barrel since the beginning of the year. This figure represents a more than 45% decrease compared to the fourth-quarter 2023 average and is over 70% below the peak observed last November, signaling a challenging environment for producers.

Impact on Energy Stocks

In this context, Bank of America's preference for TotalEnergies is based on specific strategic advantages. The bank highlights the company's earlier buyback resets and an anticipated lift in free cash flow, positioning it favorably compared to its peers during this period of margin compression.

Summary

While the sharp drop in refining margins presents a headwind for the European energy sector, analysts suggest that companies with strong financial strategies, like TotalEnergies, may be better equipped to navigate the challenging market. Investors are closely watching how these dynamics will influence stock performance.

FAQ

Q: How much have European refining margins fallen?
A: They have averaged around $7.5 a barrel this year, which is over 45% below the Q4 2023 average and more than 70% below the November peak.

Q: Why does Bank of America prefer TotalEnergies stock?
A: Bank of America favors TotalEnergies due to its proactive share buyback programs and an expected increase in free cash flow, which could provide resilience.

Source: Investing.com