Integrated energy stocks recuperate in 2016
Crude oil, which started its downward journey in mid-2014, reached rock-bottom price levels in January 2016. Since then, crude oil’s price has been rising amid volatility. The rise is the result of oil producers’ efforts to support oil prices and global supply outages and reductions’ impacting the supply glut.
Crude prices saw weakness in mid-August 2016. Since September 20, 2016, however, oil prices have risen 24%. In December, oil prices spiked on news of production cuts by OPEC (Organization of the Petroleum Exporting Countries), which were also supported by Russia, a non-OPEC country. For more information, read Crude Oil Prices Skyrocket as OPEC Agrees to Cut Production.
Since September 20, 2016, Shell (RDS.A) has seen its stock rise 16%. Shell’s peers BP (BP), ExxonMobil (XOM), and PetroChina (PTR) have risen 13%, 9%, and 15%, respectively. Eni (E) has risen 16% in the same period. Chevron (CVX) and Statoil (STO) have risen even sharply by 20% and 21%, respectively. For exposure to the integrated energy sector, you can consider the Vanguard Energy ETF (VDE). The ETF has ~38% exposure to integrated energy sector stocks.
Integrated energy stocks’ prices are positively correlated with crude oil prices. This correlation is also visible in these companies’ previous years’ stock price performances.
Shell’s stock performance
Shell’s stock had a weak opening to 2016. It traded below its 50-day and 200-day moving averages at the beginning of the year. Its share price touched a trough on January 20, 2016. Since then, amid volatility, the stock has risen due to firming oil prices. During this upward movement, Shell’s stock, amid volatility, intermittently crossed above and broke below its 50-day and 200-day moving averages, respectively.
In November, Shell posted its 3Q16 results, beating analysts’ consensus estimates. For more information, read Shell’s 3Q16 Earnings: What a Positive Surprise! Better-than-expected results followed by spiking oil prices in December likely led to Shell’s stock crossing over its 50-day and 200-day moving averages. Shell’s 50-day moving average also crossed over its 200-day moving average during this period. Currently, Shell’s stock is trading above its 50-day and 200-day moving averages.
In this series, we’ll provide you with an update on Shell’s market performance. In the next few articles, we’ll examine analysts’ ratings for Shell, Shell’s dividend yield, short interest position, institutional ownership status, and implied volatility movements. Then we’ll look at Shell’s valuations and correlation with crude oil.
Move on to the next article to know why the majority of analysts rate Shell positively.