Oil giants Repsol and Galp struggle due to low prices, offering substantial discounts
Hot tip: European oil stocks are a profitable play, but tread carefully
Europe's oil stocks are grabbing attention, with undervalued shares and the strong euro making them a potentially lucrative investment. But you need to know the ins and outs before diving in.
Oil prices and exchange rates are the two primary drivers of European oil companies' valuation. Let's break down how these factors are shaking things up.
Oil Prices: A Cautious Play
Oil prices have been under pressure recently. The OPEC+ alliance is boosting production and economic conditions ain't stellar. Brent crude dropped when OPEC+ announced planned increases of 411,000 barrels per day in April 2025[4]. Lower oil prices can cut into revenues and profits for companies like Repsol and Galp.
Demand uncertainty due to trade tensions means the outlook for oil majors isn't exactly rosy[2]. It might lead to warier investment strategies from the top dogs.
Exchange Rates: The Euro'sstrength Works in Your Favor
European buyers are getting a helping hand from the euro's strength against the US dollar. It means that euro-denominated oil prices are more favorable compared to dollar-denominated ones[1]. This advantage can support European oil companies by lowering costs for dollar-denominated transactions.
Oil Majors Go Back to the Basics
Many European companies are scaling back on renewable energy investments. They're focusing on hydrocarbons again due to profits concerns[5]. This move could impact the valuations of Repsol and Galp as they adjust their strategic focus.
Repsol and Galp: The Lowdown
Repsol and Galp are making strategic moves to mitigate risks and secure growth. They're diversifying portfolios, with Repsol investing in various energy sectors and Galp expanding in new markets.
As they balance investor expectations with long-term sustainability goals, they'll need to navigate these challenges and opportunities carefully[5].
Our columnist Jörg Lang, who's been dealing with stocks since 1988, has weighed in on this topic. His advice? Tread with caution. Despite the allure, the oil and energy landscape is complex, and a good understanding is crucial before taking the plunge.
The collapse in oil prices, as a result of increased production by OPEC+ and economic uncertainties, poses a challenge for European oil companies like Repsol and Galp, potentially cutting into their revenues and profits. The strength of the euro against the US dollar works in favor of European oil companies, as it makes euro-denominated oil prices more favorable and helps lower costs for dollar-denominated transactions. With many European companies focusing on hydrocarbons again due to profit concerns, the strategic focus of Repsol and Galp could be impacted, requiring careful navigation of risks and opportunities.
