The evolving political landscape in the European Union could significantly influence investment strategies in the energy sector, according to Citi analysts.
"The changing shape of EU politics could mark an important shift in how the investment community re-engages with the energy sector," Citi argued in a note Monday.
Analysts explain that over the past five years, the focus has been primarily on green initiatives, but the upcoming period might balance both energy transition and security, positioning traditional energy companies as part of the solution.
Citi highlights the emergence of a profitable, scalable transition business within BP (NYSE:BP) as a potential benchmark for modern European energy companies.
Analysts believe that BP's dual approach—combining a robust transition business with a resilient oil and gas sector—could appeal to progressive equity portfolios.
"We think it is the emergence of a profitable, scalable transition business within BP that can set the standard for how a modern European energy company can sit within progressive equity portfolios," Citi wrote.
Despite a potentially more progressive political environment in Europe, Citi remains cautious about European investors re-engaging with energy without conditions.
However, companies demonstrating growth in transition businesses alongside profitable oil and gas operations could attract broader appeal. Citi projects that BP could achieve a 25% transition share of earnings by the end of the decade, potentially increasing when viewed by value.