(Bloomberg) -- Analysts at BNP Paribas Exane downgraded their ratings on three major oil companies due to an expected further decline in crude prices, with Exxon Mobil Corp. getting its first sell-equivalent rating in over a year.
“Substantial excess OPEC+ capacity is hanging over the sector like the Sword of Damocles,” analysts including Lucas Herrmann wrote in a note to clients. Oil prices “will have to move to levels that may not only stimulate a demand improvement but also drive short-cycle US supply curtailment,” they said.
Exxon Mobil shares fell as much as 1% after the analysts cut their rating to underperform from neutral and lowered the UK’s BP Plc and Spain’s Repsol SA to neutral from outperform, citing exposure to a weaker refining outlook for all three companies. BP and Repsol shares both fell in European trading. Energy was one of the worst-performing of the 11 sectors in the S&P 500 Index on Wednesday.
Exxon had lost its last sell rating in August 2023 as Redburn Atlantic upgraded its recommendation.
Exane says Brent crude prices may need to fall to as low as $60 a barrel, given supply dynamics. Crude futures fell below $76 in London trading.
“We suspect investors’ appetite for oil sector investment will be more challenged,” Exane added.
--With assistance from Geoffrey Morgan.
(Updates with US trading moves throughout.)
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