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Investing.com -- Europe’s oil majors are entering 2026 under mounting pressure as Kepler Cheuvreux warns of an “inevitable oil glut,” driven by expanding global supply and weakening market balances.
The analysts expect Brent to fall below $50 per barrel by year-end or early 2026, leaving investors with limited upside across the sector.
Within this landscape, Kepler Cheuvreux identifies Shell and TotalEnergies as its two “Most Preferred” European names, though both carry “hold” ratings as oversupply concerns dominate outlooks.
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Shell
Shell is listed as one of Kepler Cheuvreux’s two Most Preferred European names, though the brokerage keeps a "hold" rating.
The brokerage notes that the sector, including Shell, appears “fairly valued” even when using a Brent $60/bbl deck.
At a Brent $50/bbl tactical valuation, Shell’s sum-of-parts calculation stands at €30.4, with a target price of €30.5, indicating modest downside from current trading levels.
Despite the muted valuation outlook, Shell’s dividends are described as “safe,” with a forecast 2025 dividend yield of 3.9%.
The brokerage adds that refining margins, including diesel tightness linked to Russian refinery outages, are currently supportive but not enough to offset the expected oversupply that weighs on broader sector sentiment.
TotalEnergies
TotalEnergies is the second of Kepler Cheuvreux’s Most Preferred names, also carrying a "hold" rating.
Under the firm’s Brent $50/bbl tactical valuation framework, TotalEnergies’ sum-of-parts figure is €51.3, with a target price of €51.5.
The group’s projected 2025 dividend yield is 6.2%, placing it among the higher-yielding European majors. While the company’s cash-return framework remains intact, the sector faces a notable contraction.
Kepler Cheuvreux reports that total cash returns to shareholders for the European majors are expected to fall 10% in 2025, 33% in 2026, and 31% in 2027, each compared with 2024, as rising supply and softer oil prices weigh on free-cash-flow generation.
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