RBC Capital Markets has moved Repsol up two ratings levels to Outperform from Underperform, arguing that recent disruptions to refining capacity in the Middle East have materially altered the outlook for the energy sector. The bank increased its target price on Repsol shares to €25, up from €20.
In a note authored by analysts led by Biraj Borkhataria, RBC said: "Recent events suggest 2026 is set to be anything but 'normal', with significant disruption to the Middle Eastern refining complex setting the stage for material inventory draws." The team points to attacks on energy infrastructure tied to the conflict involving Israel, the U.S., and Iran as drivers that have already removed a meaningful share of refining throughput from the market.
RBC's working estimate is that roughly 1.8 million barrels per day of refining capacity are either offline or operating at reduced throughput after a series of attacks and precautionary shutdowns across the region, including disruptions at the large Ruwais refinery in the United Arab Emirates. The analysts say this loss of capacity is likely to tighten global supplies of refined products, with distillates such as diesel most affected.
The bank's central case assumes the current outages persist for approximately four to six weeks. Under that scenario, RBC models global diesel inventory draws of about 12 million barrels, which would leave stocks close to the bottom of their five-year range. The firm expects those inventory reductions to keep refining margins elevated through the year, creating a favorable operating environment for companies with meaningful distillate output.
"As one of the larger distillate producers in Europe, this clearly benefits Repsol and is a source of upside to earnings," the analysts wrote, identifying Repsol's distillate exposure as a key channel for near-term profitability gains tied to the supply tightness.
RBC also highlighted strategic developments from Repsol's recent capital markets day as additional support for a more constructive view. Management outlined plans to lower capital intensity in the upstream business and to move the company's low-carbon generation segment toward a self-financing model. Those changes are cited as improvements to Repsol's strategic profile.
Using forward commodity prices, RBC projects that Repsol's free cash flow yield will exceed the peer group average. The firm estimates a free cash flow yield of around 10% for Repsol in 2026, versus roughly 8% for peers, with Repsol's yield rising to about 12% by 2030 under those assumptions.
Shareholder returns also factor into RBC's revised stance. Repsol now guides to a payout ratio of 30%–40% of cash flow from operations, and RBC expects the company to raise its dividend at an annual pace of about 6% to 7%, compared with approximately 4% for most peers. "In light of all this, we double upgrade to Outperform," the analysts said.
The analysts cautioned that their more positive outlook is not without principal downside scenarios. A rapid resolution of the conflict or a large-scale release of strategic reserves could temporarily relieve pressure on oil product markets and compress refining margins. The team noted that while such developments may provide short-term relief, they believe a rapid inventory rebuild is unlikely and recommend investors consider buying weakness given the prolonged re-build of stocks and the prospect of stronger refining margins from the recent outages.
The overall case from RBC combines a near-term technical shock to refined product supplies with strategic company-level changes that support free cash flow and shareholder returns, positioning Repsol to outperform peers in the bank's view if the central assumptions hold.