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Because the trading hours for Shel and Brent are different, daily charts which compare the two can be slightly off because they use closing prices which are hours apart. This hourly chart of Brent since late January gives a more synchronised picture of the two:
https://invst.ly/14ps3v .
What is particularly striking is the divergence between the two that began in late March, with Shel now roughly 15% up on its price relative to Brent in mid March. At that time, $84 Brent would have been compatible with an sp of around 2500 rather than Friday's 2870. This does indicate that a revaluation of Shel has been in progress since the FY results and the question then becomes how permanent is it?
Well any notion that it might be temporary is probably mistaken, given a six year comparison of Shel against Brent: https://invst.ly/14ptc6 which shows that Shel’s sp is only now back at an equivalent level to that which existed prior to the OP War of early 2020 and COVID, which together caused the dividend cut and collapse in sp to below £10.
It's all looking good for Shel right now.
Yes, today the SP is up whilst the OP is down - it is not unusual over the last 2-3 months. Personally I have been finding the oil market (& the market generally) a bit counter-intuitive, lacking logic or simply irrational. Of course it might just be me!
An extensive barrage of missiles and drones launched at Israel (with a multi-national response), retaliatory strikes from Israel, & the oil-market pretty well ignored any prospect of escalation of war in the Middle-East. Similarly with attacks on shipping in the straits of Hormuz, even with US, UK responses etc. All very weird.
One of the biggest suppressants of the OP for me has been the US Election getting nearer on the Horizon. Biden very obviously wants gas prices as low as possible & is trying everything to insure this! You name it, playing around with the SPR, pressurising refinery costs, calling in favours from Middle-Eastern producers, maximising the Permian output so that the US has become the biggest oil producer in the world, then using its swing producer status in an attempt to "control" or at least calm the oil market. Stubborn inflation leading to slower interest rate cuts.
Russian, Iranian, and Venezuelan tanker fleets going "dark" at sea. Switching cargo from one ship to another at sea, changing ownership, turning off identification signals in mid-journey etc. Although adding massively to the costs, actually selling the oil on at steep discounts, therefore suppressing the price.
Maybe the OP is too "falsely" low relatively at the moment, but it seems likely to me that it will converge with the SP again, because the Shell SP is so intrinsically linked to the prevailing raw material input price of crude oil and gas. My view is still that the gap will close, when some kind of normality returns after the US Election.
Very good points GfG. I think that a rerating of Shel v OP was due but I’m starting to sense that that re-rating could be overdone, which will ultimately lead to a correction. During April there seemed to be a consistent market upgrade of Shel’s sp but over the last couple of weeks (roughly since the marker here: https://invst.ly/14r2jq ) OP has drifted down whilst Shel’s sp has remained near the maximum and I wonder if the market has taken its eye off the ball - perhaps assuming that OP is destined to return to higher levels. I’m almost out of Shel now as it was prudent to lock-in my accumulated gains of the last five years. I will progressively return as the picture clears. ATB
I agree, quite a serious and somewhat overdue rerating of the Shell SP. Although we can get a positive rerating, common sense tells me that this will have a limit, due to the serious size of Shell - the SP is not going to double overnight. So, I keep thinking the SP is a bit toppy, together with £30 is bit of a barrier to upward progression for now.
Bailing out at £28.33p was a bit early, but in the final analysis it was pure Fear Of Missing Out. You are never wrong to take a gain. I look to have burnt this dividend, but then we will be into more interesting buying back territory hopefully.
The BP results indicating that it is weak & getting weaker, squandering capital, increasing debt whilst carrying on with buy-backs, seem to make it very vulnerable. Market reception of the results seems to strongly indicate that either a robust change of strategy & direction is necessary, or it will be taken over.
Wael Sawan will not necessarily go down in economic history books as the CEO who did a lot of buybacks, but he will if he takes over/merges with BP - it must be something he is considering!
Another day SP slightly up, OP down. Either, this reflects the pressing possibility of "peace" in the Middle-East and the rerating of Shell approaching Ex-D on the 16th May, or alternatively I have landed on the wrong planet and speak the wrong language! Time will no doubt tell!
Getagrip
“Wael Sawan will not necessarily go down in economic history books as the CEO who did a lot of buybacks, but he will if he takes over/merges with BP - it must be something he is considering!”
They must have informally discussed some multiple of BP to Shell that they cannot resist.
And if they haven’t they are not doing their job.
But BP sum of the parts means they can sell off all they don’t want, or need to sell to pay a chunk of the cost
MOY - I think they must still have a room at each HQ dedicated to Shell & BP merger discussions, which probably even predate what Lord John Browne stated on regrets in his autobiography. As you know his final chapter was a UK court lifting an injunction on publishing revelations about his private life - how the past has come back to haunt BP!
After having NO intention of holding Shell shares through a prospective Autumn election, I bought back in this afternoon - it looks like just before Rishi announces a Summer Election! You couldn't write the script!
Should say Autumn/Winter Election!
Hi Ggp good to see back here, I hope you enjoyed your Profit and a few weeks of stress free from Shell! :-)
Many thanks Larry. it's good to be back. I really like Shell & the shares have been very kind to me, so I have to bear in mind that the shares do not know that I own them! I parked some of the funds in RELX, but it was only a brief flirtation - still on my radar though.
I burnt the Shell dividend this time, but I'm nicely ahead even after taking account of this & after having gifted the Exchequer four-figures in stamp duty. Ouch!
Just back from walking the Eden Way in Cumbria, around 70-miles, taking a week out with a bunch of old school buddies! I think the pain from my, softer than I thought, feet was even worse than watching the SP go up further after I bailed out of Shell. Oh! Well it's always gratifying to know that I don't just confine my misjudgements to shares!-
Hi Ggp you are absolutely right “The shares do not know that We own them” and I would add “Let alone care”, I remember your quote last year to another poster because you captured my thoughts and phrased it well and so I try to remind myself to no personalise my choices in the Market.
Don’t worry we win some and lose some in life, like Frank Sinatra said “That’s Life” :-), tbh to me there’s no time right in real life as such so just I try to focus if i’m happy with Profit/Loss at the time, cos we only live in present and not in hindsight. You are a winner to me when you have a good and decent Profit on you money, the compounding effect is really important thing in finance. I’m still holding it here but when I bailout hopefully it will be with good Profit i’m happy with if i’m that lucky that’s and will not look back.
But with your sore feet I don’t envy there, put your feet up and have some rest and welcome back on this roller coster ride with Shell! :-)
Larry,
Some great views, particularly on compounding. One of my favourites on whether to sell shares is would I buy them today. if the answer is an emphatic NO I know whether to sell them!
This time I was very edgy about having sold Shell - I just think there are so many positives for them at the moment. Cometh the hour cometh the man & for me Wael Sawan will prove to be one to follow!
Hi Ggp I agree your comments about the company and CEO and I believe the momentum is still upward at the moment and that’s why i’m still holding it. But that’s just my opinion and so I try not personalise it and remember the quote “Markets are never wrong – opinions often are” from Jesse Livermore and I just let the Stock price to confirm or contradict my opinion and because the Stock doesn’t know I own it let alone care.:-)
I’d disagree with your preposterous comment on whether you should sell your SHEL shares.
Firstly, look at the VIX today, it’s showing a true lack of complacency in investors thinking everything is great.
You should follow this VIX trading theory;
When the VIX is low ( NOW ) time to go;
when the VIX is high, it’s time to buy.
Throughout the past 10yrs, low VIX readings have preceded stock weakness resulting in shocks to stockmarket movements, and high VIX readings have preceded stock strength.
I can see a mean pullback from these leve. When. In next couple of months.
I base this in interest rates NOT being lowered.
Lowering interest rates is only going to do one thing, it’s going raise inflation numbers duh.
Get ready to buy when you see the VIX reaching at least 19-20
Throughout the past 10yrs, low VIX readings have preceded stock weakness resulting in shocks to stockmarket movements, and high VIX readings have preceded stock strength.
Are you joking?
MrP - unfortunately it looks like he is not joking - the same litany of drivel is cut and pasted across multiple threads. The confusion of his VIX readings analysis, indicates his tenuous grasp of the subject!
When he ventures out into very basic economics theories and views, he gets even more confused:
"Lowering interest rates is only going to do one thing, it’s going raise inflation numbers duh."
Reminiscent of a scalar in a sense - in that he has force but no direction!