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Investing.com -- Barclays expects a sharp rebound in European energy earnings, driven by surging commodity prices and stronger refining margins.
Analyst Lydia Rainforth wrote in a note on Tuesday that the sector is “set to deliver a q/q increase in earnings” as supply concerns linked to the Middle East conflict push prices higher.
Updated forecasts are now “30% ahead of consensus for FY26,” according to Barclays.
Rainforth expects first-quarter net income to recover meaningfully. Brent crude averaged $77 per barrel, a 22% quarter-over-quarter rise, prompting Barclays to project that sector earnings will increase “by more than 40% q/q.”
The analyst added that the gains will be supported by improved refining margins, higher crude and natural-gas prices, and potentially stronger trading results amid heightened volatility.
Regional exposure is said to vary, with majors including BP and TotalEnergies concentrated in upstream and LNG activities, while Shell is tied largely to Qatar’s GTL operations.
OMV remains more weighted toward refining and chemicals. Barclays said higher prices should “largely offset any reduction in output.”
“All cylinders [are] firing together,” wrote Rainforth, noting that crude rose 22% quarter-over-quarter, European gas 32%, and NWE refining margins 9%.
Returns on capital are expected to reach 12%, matching levels last seen when Brent traded near $85. At that same price, Barclays estimates FY26 EPS would rise by about 50% versus FY25.
Sector valuations remain compelling, according to Barclays, with a median 2026 free-cash-flow yield of 8.6%, above the 20-year average.