SB1 Markets downgrades Equinor to sell on oil, gas outlook
Oil futures rose in early trading on Aug. 27 after three sessions of declines, with the market watching for progress toward a reopening of the Strait of Hormuz. WTI traded at $82.50 per barrel, up 0.3%, and Brent at $88.78 per barrel, up 1.1%, by 9:58 a.m. ET, according to Dow Jones Newswires Market Talks published by The Wall Street Journal.
Kaynat Chainwala of Kotak Neo wrote in a note that the pickup was “underscoring how two-sided the market remains as traders balance diplomatic optimism against limited evidence of a meaningful improvement in physical flows.” Chainwala added that “the path forward hinges on whether the 30- to 60-day corridor timeline holds and physical loadings actually rise, leaving prices vulnerable to sharp reversals on any setback.”
The gains followed losses in the prior session. Dennis Kissler of BOK Financial wrote that “the de-escalation and fears of tighter global supplies are easing, which is tripping some long liquidation by funds,” and noted that rising U.S. commercial crude stocks added to the bearish tone. The EIA reported a 95,000-barrel increase in crude inventories, the fourth consecutive weekly rise, though smaller than expected. WTI ended the prior session down 0.2% at $82.23 per barrel and Brent fell 0.8% to $87.84 per barrel.
Among analyst moves, SB1 Markets downgraded Equinor to sell from neutral, with analyst Teodor Sveen-Nilsen writing that the Norwegian energy major’s strong year-to-date performance had been driven primarily by higher oil and, “above all,” gas prices, combined with the company’s large spot-price exposure. The current share price “already seems to discount 1-2 years of exceptionally high profits,” Sveen-Nilsen wrote. SB1’s main scenario, he added, is that oil and gas prices — and shares in the sector — will be lower in 6-12 months. The bank reiterated its 365 Norwegian kroner target price. Equinor shares fell 0.4% to 386.20 kroner.
DBS Group Research retained its buy rating on Cnooc with a target price of 30 Hong Kong dollars, writing that Cnooc’s earnings are likely to remain resilient even as they normalize after exceptionally strong first-half results. DBS highlighted Cnooc’s competitive cost base, which “provides meaningful downside protection in scenarios of lower oil prices,” and its strong project pipeline. Cash generation and a higher dividend translated to a 6% to 7% yield, “reinforcing Cnooc’s appeal as a high-quality oil proxy with visible shareholder returns,” DBS said. Cnooc shares were 0.6% higher at HK$25.06.
Nomura raised its target price on Eneos Holdings to ¥1,630 from ¥1,560, with analyst Shinichi Yamazaki writing that Eneos is poised to benefit from a likely increase in petroleum product exports thanks to favorable petroleum product prices in Singapore. The bank’s note cited Eneos’s “superior supply capacity, reflected by its top share of petroleum product sales,” and pointed to the company’s investments under a “management allocation framework” covering selective strategic investment including mergers and acquisitions. Nomura kept its buy rating unchanged. Eneos shares were 1.0% higher at ¥1,326.5.
Barclays’s Lydia Rainforth wrote that Harbour Energy’s appointment of Simon Henry to its board “gives it extensive energy, financial and governance experience.” Henry, the former Shell chief financial officer, returns to the Harbour board after stepping down last year to take a board position at BP. “His experience running large international energy businesses is highly relevant as Harbour integrates acquisitions and manages a significantly larger and more geographically diverse portfolio,” Rainforth added. Harbour Energy’s shares closed Wednesday at 249.80 pence.