Investors are betting on a transition away from fossil fuels to renewable energy at a time when coronavirus is impacting oil prices © FT montage; Bloomberg

Big European oil and gas companies have shed more than €360bn in market value this year while renewable energy stocks and technology companies focused on cleaner fuels have surged.

The gulf in performance between the two groups highlights how investors are betting on a transition away from fossil fuels, while oil majors such as BP and Royal Dutch Shell grapple with a brutal downturn in crude prices and how to execute their own shift towards greener forms of energy.

The 16 oil and gas groups on Europe’s blue-chip Stoxx 600 index have taken a €364bn, or 53 per cent, tumble in market value, according to a Financial Times analysis of Bloomberg data based on Wednesday’s closing prices.

BP, Shell, Repsol and Eni have lost around 60 per cent each this year in local currency terms, with peer Total also having sustained severe losses of around 50 per cent. The sector was hit with a wave of selling on Wednesday after the price of Brent crude fell 5 per cent to $39 a barrel.

“In a world where oil was the only game in town, there was a sense that things will always come back. But it isn’t the only game in town now,” said Charles Donovan, a professor at the Centre for Climate Finance and Investment at Imperial College Business School.

Covid-19 has hit oil demand as governments imposed travel bans and restrictions to curb the spread of the virus. Brent crude, the international oil benchmark, fell from $70 a barrel in January to below $20 in April. Although it has recovered to around $40, it has left a big hole in budgets across the industry.

Line chart of Rebased  showing European oil majors endure heavy selling

New pledges to tackle climate change have failed to help European oil majors which have all come under increasing investor pressure to clean up their businesses.

While companies have promised to increase investment into lower carbon energy, they are still expected to derive the bulk of their cash from hydrocarbons for years to come.

BP and Shell in recent months have seen their share prices fall to multi-decade lows and Mr Donovan said European oil majors will not be rewarded until they can prove a meaningful shift is under way.

“All the share prices across the sector are down,” BP’s chief financial officer Murray Auchincloss said this week after the group reported its quarterly earnings, adding that progress towards cleaner energy cannot be measured “day-by-day on the stock market”.

In contrast, cleaner energy players and industrial companies making renewable technologies and equipment are having a banner year. Dutch energy storage company Alfen has jumped more than 230 per cent, leaving it at the top of the Stoxx 600 leaderboard. UK-based ITM Power, which manufactures hydrogen energy equipment, has risen by 220 per cent while Ceres Power Holdings, a developer of fuel-cell technology, is up 148 per cent.

Line chart of % change showing Renewable energy stocks have enjoyed a strong rally

The sector has been lifted by a push for cleaner fuels from world politicians from Europe to China, which is targeting net zero emissions by 2060.

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“After over one hundred years of false starts, government policy is now firmly supportive of hydrogen as an enabler of CO2 reduction targets,” said analysts at Citi in a recent report. They said the EU’s new climate targets together with new goals from countries ranging from Japan to Australia “all point to a global watershed moment”.

Shares in Spanish renewables player Solaria Energia y Medio Ambiente have leapt 131 per cent in 2020 and Norwegian hydrogen company Nel is up 91 per cent.

Denmark’s Vestas Wind Systems has jumped 51 per cent while domestic peer Orsted, the world’s largest developer of offshore wind farms, has risen 37 per cent.

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