Kepler Cheuvreux has downgraded TotalEnergies and removed it from its Sector Most Preferred list. The firm cited rising vulnerability to a prolonged LNG oversupply cycle. As a result, BP is now Kepler's preferred pick in the sector. Analyst Bertrand Hodée anticipates TotalEnergies holding a net long LNG position, increasing its exposure to potential losses.

This shift reflects concerns about the LNG market. Kepler foresees a potential oversupply, especially if prices fall. BP's portfolio is considered better positioned for an LNG downturn. BP's long LNG position is expected to decline by 2027. This move highlights the importance of strategic positioning in a volatile energy market.

Hodée's analysis also factored in Asian LNG demand limits. Constraints around coal-to-gas switching could curb the market's ability to absorb new supply. Lower spot prices may be required to rebalance global gas markets. This cautious outlook underscores the risks facing energy companies.

What's next? Investors should watch LNG price trends, especially in Asia. The performance of BP and TotalEnergies will provide insights into how companies are navigating the shifting energy market. This change in perspective suggests more volatility ahead for the sector. The analysts also adjusted the sum of parts (SOP) valuation based on a price assumption of $55 per barrel for 2026.