Investing.com -- Barclays has upgraded Repsol (BME: REP ) to Overweight while downgrading Equinor ASA (OL: EQNR ) to Equal Weight, as it sees conditions aligning for a multi-year bull run in oil.

The global bank believes the market is underestimating the strength of oil demand and overestimating the sustainability of non-OPEC supply growth.

“We see the scene as set for a material up-cycle in oil prices, as non-OPEC supply growth slows significantly and continued strength in demand reduces OPEC+ spare capacity rapidly,” analysts led by Lydia Rainforth said in a Thursday note.

“Oil demand is continuing to surprise to the upside and, with refining margins at 18-month highs, we see this as indicative of underlying fundamental strength,” they added, while above-ground inventories remain relatively low.

The report also challenges recent concerns about weak demand, stating that the so-called “missing barrels” in supply data are actually a result of stronger demand, estimated at around 1 million barrels per day.

The upgrade of Repsol reflects Barclays’ confidence in the Spanish company’s near-term and medium-term growth outlook. Repsol’s refining margins are performing better than expected, and its €2 billion disposal plan is seen as a positive catalyst.

The company is also ramping up upstream production through several projects coming online between 2025 and 2027. Barclays highlights the firm’s strategic shift toward a “bigger and greener” model, with a strong low-carbon presence in Iberia generating cash flow.

“Management indicated that its low-carbon business in Iberia is not only generating cash flow but also has size, which enables it to take advantage of integration with customer businesses,” the analysts noted.

Regarding its valuation, Repsol shares offer a cash yield of 13% in 2025 and 15% in 2026, including dividends and buybacks—among the highest in the European energy sector, Barclays noted.

Conversely, Equinor’s downgrade stems from its high exposure to European gas markets, which Barclays views as a risk. About 40% of Equinor’s output is sold at spot prices, and the bank warns that a potential Ukraine ceasefire could hit prices hard.

The Norwegian company is also struggling to find viable low-carbon investment options.

“Equinor’s c10% equity investment in Orsted (CSE: ORSTED ) has also come under pressure,” the analysts said, citing a significant year-to-date decline in Orsted’s stock.

Despite the near-term uncertainty caused by OPEC+ volume increases, Barclays advises investors to take advantage of current valuations.

“We see the coming 12 months as the right time to build positions in key names,” including Repsol, Shell PLC (AS: SHEL ), and Eni SpA (BIT: ENI ), with TotalEnergies (EPA: TTEF ) seen as a consistent holding through the cycle.