Can we be positive on oil equities into a weak commodity environment in 2026? We can if the sector continues its re-rating! The arguments are robust for valuing the sector at 8-10% free cash yields. However greater market confidence is only likely with a ''V'' shaped oil price recovery. Is 8-10 the new 10-12... the European Supermajors have not yet benefitted The 2026 macro-outlook hardly inspires positivity: oil shifting into oversupply, a last winter of tight gas and refining margins fading through the year. Yet, with the stocks outperforming oil through 2025, it begs the question of whether the sector has re-rated? Disciplined capital allocation to an ever-extended energy transition, healthier balance sheets, sacrosanct dividends and commitment to distribute excess cash through buybacks are robust arguments for 8-10% FCFY being a more appropriate valuation level. But even with a ''V'' shaped oil price recovery the Majors already trade within the new range, so we look to Supermajors as beneficiaries of a re-rating catch-up. Second derivative exposure can be positive (AI and Russia) ... Time for another look at OFS With AI growth comes energy growth. US data centres will add ~500 TWh of electricity load by 2030 and, combined with 13bcf/d of LNG gas demand growth, the US Hub exposed corporates will likely benefit. Whilst a Russia/Ukraine ceasefire would weigh on the commodity price, TTE emerges as the standout ceasefire name. With oil price downside risk, best-positioned are the companies with strong balance sheets, resilient cashflows and robust distributions... time to look to the OFS names! Little change to ratings... but updating valuations to embed the partial re-rating While we do believe that there are healthy arguments for a sector re-rating, key is market confidence that we are approaching the bottom of the oil price cycle. Therefore, until that time we leave European stock ratings unchanged. A resilient Shell (+), an alpha opportunist bp (+) and a...