Shell say they will keep spending inline despite profits growing.

Thursday, 31st January 2019 11:19 - by Rajan Dhall

Shares in the company have risen around 4% this morning after a stellar report. Profits from the oil giant gushed by more than a third to their highest since 2014 at $21.4 billion for 2018. Q4 adjusted profit came in at $5.69 billion vs expectations of $5.39 billion. Obviously, the company benefitted from a higher average oil price but they have also shown discipline in reducing debt by controlling CAPEX. Elsewhere, Shell are set to commence their third trance of share buybacks which also affects the supply-demand balance of shares in the marketplace pushing prices higher. 

It has been a good week for oil in general as inventory levels produced a smaller build than expected in both API's and DoE's. To add to this just yesterday Saudi Arabia stated they are looking to cut production further in order to support the oil price and this morning Russia added to this by saying they are to cut production to 11.38 million barrels per day in January. 

Looking at the daily chart for Shell now and you can see that prices stalled at the trendline which originated at the beginning of November to the next peak in January 2019. This is not to say it will not break the resistance zone, it's just to point out if it does it may be significant as the price has been in a downtrend since October. If price does break this level it will need backing from oil, which is currently holding up well. 2500p is the psychological resistance which may be a good target once confirmation is made. Looking ahead to key events, at the next OPEC meeting we are set to find out if there is an extension to the OPEC + cuts. Last time out a total cut of 1.2 million barrels per day was agreed with OPEC members cutting 800 thousand barrels and non-OPEC making up the rest. If we see an extension or any addition to the cull it could be possible for the share price to rise further but of course it is dependent on these variables. 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.