Why Has Short Interest in Shell Plunged?



Short interest in Shell

In the previous article, we reviewed changes in institutional holdings in Royal Dutch Shell (RDS.A). Now let’s look at the changes in its short interest.

Short interest (as a percentage of outstanding shares) in Shell has fallen marginally from 0.13% on January 2, 2019, to its current level of 0.09%. Usually, a fall in short interest implies a decline in bearish sentiments for a stock. Since January 2, Shell stock has risen 6%.

Article continues below advertisement

Why the change in sentiment?

The fall in short interest in Shell since January 2 could be the result of the rise in oil prices. In 2019 so far, WTI crude oil has risen 21%. Oil prices are relevant to integrated energy companies, as they’re one of the main determinants of upstream earnings. The rise in oil prices in the current quarter could mean quarter-over-quarter stronger upstream earnings for Shell in the first quarter.

The fact that Shell’s fourth-quarter earnings surpassed Wall Street analysts’ expectations may also have led to a decrease in the bearish sentiments surrounding its stock.

Peers’ short interests

Short interests in Shell’s peers Petrobras (PBR), YPF (YPF), and Suncor Energy (SU) have fallen 0.09%, 0.22%, and 0.17%, respectively, since January 2. Currently, short interests in Petrobras, YPF, and Suncor stand at 0.73%, 0.45%, and 0.54%, respectively. If we review their stock performances, then Petrobras, YPF, and Suncor have risen 20%, 9%, and 22%, respectively, since January 2.


More From Market Realist