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Investing.com -- Repsol (BME:REP) shares gained nearly 2% on Tuesday after JPMorgan double-upgraded the Spanish energy giant to Overweight (OW) from Underweight (UW), citing its strong leverage to persistent diesel market tightness and potential benefits from OPEC-driven crude price spreads.
The bank’s analysts said Repsol’s “EPS sensitivity is a top end 7% per $1/bbl change in refining margin” and that its more than 50% middle distillate yield — mainly diesel and jet fuel — positions it as the prime beneficiary in the sector.
The company operates a high-quality, large-scale Iberian refining system with capacity near 1 million barrels per day, integrated with upstream output of around 550,000 barrels per day, and with refineries poised to run at high utilisation through year-end after maintenance was front-loaded into the first half.
JPMorgan raised its price target for Repsol to €15.5 from €12, highlighting there is “plenty of room for a diesel stimulated re-rating” given its 7.3% dividend yield, 12.5% total cash yield including buybacks, and 2026 price-to-earnings (P/E) at the low end of the sector at 5.5x.
The firm also highlighted Repsol’s advantage from any widening in light-heavy crude spreads, as its complex coastal refineries could capture higher margins.
The upgrade comes as the bank forecasts European diesel margins at $20-25 per barrel through year-end, with “asymmetric upside” if supply is disrupted by factors such as the U.S. hurricane season or new EU sanctions on oil products refined from Russian crude.
In contrast, JPMorgan downgraded Norway’s Equinor to Underweight from Neutral, citing its limited diesel hedge, higher gearing, and “diminishing capacity to free cash flow (FCF) fund competitive distributions.”
The bank also cut its price target on the stock to NOK 240 from NOK 260.
“We double upgrade Repsol to OW for leading leverage to diesel and any OPEC stimulated widening in crude spreads and, against that, downgrade Equinor to UW as the risk moderated upstream O&G prices and rising gearing compress 2026+ cash return appears insufficiently priced into valuation,” the note states.
For Repsol, JPMorgan lifted 2025 and 2026 adjusted net income forecasts by 19% and 14% respectively, supported by a $1/bbl refining margin increase, a stronger-than-expected second quarter, and higher marketing and upstream earnings estimates.