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Why Shell’s Short Interest Has Risen

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Jun. 4 2019, Updated 10:02 a.m. ET

Short interest in Shell

The short interest in Royal Dutch Shell (RDS.A) has risen from 0.10% on April 1 to the current level of 0.15%. Usually, an increase in the short interest implies a rise in the bearish sentiments for a stock. During the same period, Shell’s stock price has fallen 1.2%.

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Why did the sentiment change?

The rise in the short interest in Shell since April 1 could be due to the fall in oil prices. In the second quarter, the WTI crude oil prices have fallen 11%. Oil prices are quite relevant for integrated energy companies. Oil prices are one of the main determinants of companies’ upstream earnings. The fall in oil prices in the second quarter could mean sequentially weaker upstream earnings for Shell in the second quarter.

However, Shell has posted better-than-expected first-quarter earnings. The company’s financials and segmental earnings have improved in the second quarter despite tough business conditions.

So, the bearish sentiment in Shell could have risen due to the expectation of weaker earnings partly offset by better first-quarter financials.

Peers’ short interest

The short interest in Total (TOT), Petrobras (PBR), and PetroChina (PTR) has risen 0.07%, 0.07%, and 0.03%, respectively, since April 1. Currently, the short interest in Total, Petrobras, and PetroChina is 0.11%, 0.87%, and 0.09%, respectively. If we review the stock performances, then Total, Petrobras, and PetroChina have risen 7.5%, 9.4%, and 15.4%, respectively, since April 1.

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