HSBC Upgrades BP and TotalEnergies to Buy on Bullish Oil and Gas Forecasts

HSBC has upgraded its ratings on European energy giants BP and TotalEnergies to Buy from Hold, driven by a significantly more optimistic forecast for oil and natural gas prices. The bank raised earnings and cash flow estimates across its global energy coverage in a research note published Friday.

Higher Commodity Prices Fuel New Outlook

Analysts at the bank lifted their commodity price assumptions, citing a partial, gradual recovery in Strait of Hormuz flows. These updated forecasts were the primary catalyst for the ratings changes.

• Brent Crude: 2026 assumption raised to approximately $90 per barrel from $80, and the 2027 forecast increased to $85 from $65.
• TTF Natural Gas: Second-half 2026 forecast lifted to $22.50 per million British thermal units (mmBtu) from $16.70, and the 2027 forecast raised to $17 from $12.

These revisions prompted HSBC to increase its 2026-28 earnings-per-share (EPS) estimates for the sector by an average of 19%, 65%, and 33%, respectively. The bank noted that revisions were largest for international majors due to their combined exposure to upstream production, refining, and trading operations.

Rationale for Key Upgrades

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For BP, HSBC raised its price target to 640 pence from 570 pence, implying potential upside of nearly 18%. Analysts believe that in a higher oil price environment, BP will be under less strategic pressure to sell assets to reduce its liabilities. The bank also noted that BP shares trade at a roughly 26% discount to peers Shell and TotalEnergies on a 2027 enterprise value to debt-adjusted cash flow (EV/DACF) basis.

HSBC lifted its price target on TotalEnergies to €93 from €80, suggesting an 18.4% upside. The upgrade was justified by the observation that the stock's valuation premium to Shell has "disappeared" and that the company could increase its share buybacks going forward.

Broader Sector Re-ratings

Beyond the headline upgrades, HSBC adjusted its views on several other energy majors. The bank maintained its Buy ratings on Shell, Repsol, and Chevron. Chevron's price target was increased to $250 from $218, with HSBC highlighting its "lowest" Middle East exposure among the five supermajors and forecasting a potential increase in its annual buyback rate to $15 billion.

Meanwhile, ExxonMobil, Eni, Equinor, and Galp were all kept at a Hold rating, with analysts noting that Eni's current valuation is "justified" following strong year-to-date performance. OMV remains at a Reduce rating. Across the sector, HSBC's revised price targets now imply an average upside of 12%, with its Buy-rated stocks showing a potential upside of 21%.