European energy stocks have become significantly less sensitive to oil price fluctuations over the past two decades, as structural improvements in balance sheets and business models have reduced companies' vulnerability to fluctuations in crude oil prices, according to UBS AG analysts in a recent note.

The study is based on a multivariate linear regression model covering approximately 42,000 observations from 2004 to 2026.

UBS analyzed major European energy companies, including BP, Shell, TotalEnergies, Eni, Equinor, Galp, OMV, and Repsol, measuring how changes in Brent oil prices correlated with stock price movements.

The model considered other key variables, such as gas prices, refining margins, and overall stock market performance.

"Our model shows that the sensitivity of stock prices to Brent has decreased over time in both directions," UBS analysts said.

They attributed the decline primarily to stronger financial performance, highlighting the significantly lower breakeven levels for dividends, which UBS now estimates at around $50 per barrel after capital cost flexibility, compared to around $100 per barrel in 2012.

Analysts also pointed to the growing share of revenue from non-oil businesses, including mobility services, natural gas, and trading activities.

To track changes over time, UBS divided the 20-year data set into approximately two-year batches and tracked the evolution of the oil price sensitivity coefficient.

Although the coefficient showed notable variability, especially over the past two years, the overall long-term trend was downward, indicating a decrease in the correlation between oil prices and stock valuations.

These findings come at a time when uncertainty about the near-term direction of oil prices continues to impact sentiment in the energy sector.

UBS noted that recent geopolitical events have led some investors to avoid energy stocks due to the risk of de-escalation and falling oil prices.

The analysis showed that energy stocks remain more sensitive to falling oil prices than to rising prices.

"Negative changes in Brent have a greater impact on stock prices than positive changes," UBS said, citing factors such as the potential for increased taxation when prices rise.

However, UBS did not find clear evidence that this asymmetry had worsened over time, despite the introduction of windfall taxes in Europe, which the bank attributed to improved underlying financial stability.

There were also significant differences at the company level. Equinor was identified as currently the most oil-sensitive stock among the analyzed ones.