Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Riding Vaccine Optimism With FTSE Oil Major Shell

By Investing.com (Tezcan Gecgil/Investing.com )Stock MarketsNov 27, 2020 04:12AM ET
www.investing.com/analysis/riding-vaccine-optimism-with-ftse-oil-major-shell-200545995
Riding Vaccine Optimism With FTSE Oil Major Shell
By Investing.com (Tezcan Gecgil/Investing.com )   |  Nov 27, 2020 04:12AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

November has been a good month for many oil companies. Buoyed by vaccine optimism, most have seen their share prices increase significantly. Three vaccines have yielded highly encouraging results in the final phases of trials.

Meanwhile, the price of Brent crude, the international benchmark, has also been firm during the month. It is currently just shy of $48. Since the end of October, the Dow Jones Oil & Gas Index has gone up by about 34%, too. However, the index is still down more than 32% year-to-date (YTD).

Dow Jones U.S. Oil & Gas Index Chart.
Dow Jones U.S. Oil & Gas Index Chart.

So, as we get ready to wrap up the penultimate month of the year, we will discuss Royal Dutch Shell (LON:RDSa) (NYSE:RDSa) to see if the oil major should find a place in long-term portfolios.

Interlinked Fortunes

Shell is one of the largest global oil and gas companies in both revenue and market capitalization. Other large players include UK-based oil major BP (LON:BP) (NYSE:BP), San Ramon, California-headquartered Chevron (NYSE:CVX), Irving, Texas-based Exxon Mobil (NYSE:XOM), Russia-headquartered Gazprom (OTC:OGZRY), Saudi Arabia-based Saudi Aramco (SE:2222), China-headquartered Sinopec Shanghai Petrochemical (NYSE:SHI) and France-based Total (NYSE:TOT) .

Fortunes of these businesses are significantly tied to the price of oil. For instance, so far in November, RDSa stock is up about 50%. In addition, it is up about 70% since the 52-week lows seen in mid-March. Nonetheless, YTD, the shares are down about 40%. On Nov. 25, the stock closed at 1,339.5p (the current price is $34.89 for US-based shares).

Royal Dutch Shell Chart.
Royal Dutch Shell Chart.

The US Energy Information Administration (EIA) released its most recent Oil Market Report in November. It is not expecting either prices or oil production to recover significantly in the coming weeks. EIA said:

“It is far too early to know how and when vaccines will allow normal life to resume. For now, our forecasts do not anticipate a significant impact in the first half of 2021."

In fact, “on an annual average basis, EIA expects US crude oil production to fall from 12.2 million b/d in 2019 to 11.4 million b/d in 2020 and 11.1 million b/d in 2021.”

Similarly on Nov. 11, the Organization of the Petroleum Exporting Countries (OPEC) also cut its forecasts for 2020 and 2021 global oil, citing rising pandemic cases worldwide and also government lockdowns. However, risk appetite in the commodity market has been on the rise.

How Quarterly Results Came

Shell released FY20 Q3 earnings in late October. Revenue came in at $44.7 billion, a year-on-year 50% decrease from $89.5 billion. Despite the decline from last year, the numbers were better than expected.

Shareholders were pleased that the board increased the dividend to “16.65 US cents for the third quarter.”

CEO Ben van Beurden stated:

"Our sector-leading cash flows will enable us to grow our businesses of the future while increasing shareholder distributions, making us a compelling investment case.”

Forward P/E and P/S ratios for Shell are 15.58 and 0.62, respectively. These numbers add to the positive shareholder sentiment that the shares offer value, even after the impressive increase in price since early spring.

Finally, potential investors may be interested to know that the group is reviewing its assets and operations to become “a net-zero emissions energy business by 2050 or sooner.” Management will also put an emphasis on commercializing hydrogen and biofuels.

Bottom Line

In the medium- to long-run prices in the global oil market are mainly a result of the available supply capacity and demand requirements. However, short-term prices tend to be volatile for several reasons, including the tug of war between short-term traders and long-term investors.

We’d encourage our readers to do proper due diligence on potential oil companies for their long-term portfolios. We believe Royal Dutch Shell, whose history goes back to 1907, is likely to emerge from the current pandemic-related crisis as a robust company, creating further value for shareholders. The fossil fuel giant may yet emerge as an alternative energy player in the years to come.

Investors who are not ready to commit capital into a single oil or energy stock could also consider buying exchange-traded funds (ETFs). Several examples would include:

Energy Select Sector SPDR® Fund (NYSE:XLE),
iShares Global Energy ETF (NYSE:IXC),
iShares MSCI Global Energy Producers ETF (NYSE:FILL),
SPDR® S&P Oil & Gas Exploration & Production ETF (NYSE:XOP)
or Vanguard Energy Index Fund ETF Shares (NYSE:VDE).

Riding Vaccine Optimism With FTSE Oil Major Shell
 

Related Articles

Riding Vaccine Optimism With FTSE Oil Major Shell

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Jimmy Smith
Jimmy Smith Nov 27, 2020 9:03AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Oil companies watching vaccines? You'd think they'd be watching the guy who supposedly got elected president and who plans to eliminate them.
Danilo Galinari
Danilo Galinari Nov 27, 2020 9:03AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good thing you dont write for this site..
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email