The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
End of week and, despite the 6% overall drop in OP (it was 9% at one point), Shel is less than 2% down since last Friday : https://invst.ly/12leqq
The fall in OP stopped last night at the bottom blue trend line here, which goes back nearly three years:
https://invst.ly/12l1bk
It could prove significant if that bottom trend line were to be broken by the combination of high US supply and low US manufacturing demand but, for now at least, OPEC+ appears to be controlling the bottom limit.
With the pull back in Shel’s sp since the highs of October, it seems worth looking back at the broader long-term context.
Shel has followed two underlying trends since the oil industry low point of 2020:
https://invst.ly/12kjs0
Firstly green which charted the recovery phase and secondly blue which charts the levelling out phase since March ‘22. The lowest thin blue suggests a current bottom around 2350 if the price continues to slide: https://invst.ly/12kkm9 although this assumes that Brent’s average does not fall below $70 - quite an assumption at present (see moniman's post).
One major factor that has separated Shel (and BP) from other oil majors was the big and historic cut in dividend in 2020, which has yet to be fully restored, although Shel has used ‘buybacks’ as alternative distributions to shareholders. So how does Shel compare with XOM, which it used to track more closely until the divi cut?
https://invst.ly/12kkfj
Still some distance to go perhaps? But it rather depends on OP, which often hits a low during the US winter months even without overproduction from the shale producers.
Sentiment is certainly keeping the blue trend alive and has moved the open and closing price solidly above 600 for the first time in over two months:
https://invst.ly/12k93d
Is the trend sustainable and what has shifted the OCDO revenue/prospects dial to make it already worth around 50% more than the £4 some analysts were suggesting back in September? Presumably market expectations regarding the January trading statement and February final results are key factors driving current strength and those expectations may well support the sp until late February and the numbers are revealed.
Yes indeed Gioviano - my comment may prove to have been a bit hasty.
Monday's candle set the scene - testing well above at 626 but it was ultimately a down day. Today saw a smaller scale opposite - taken together a sign of market indecision, leaving OCDO still on the upward trend for now. https://invst.ly/12jo6m
November's upward climb appears to be over for now with the sp possibly levelling out in the nominal 550-610 range: https://invst.ly/12j6ng
Following on from my previous comments:
For those that watch the EMA indication - which I find useful at times but usually a bit late - that indicator is showing no signs yet of converging towards a ‘buy’ signal and is consequently also suggesting the drop will continue:
https://invst.ly/12ivmo
....provided the opportunity I needed to conclude my buy back of sell-offs made in October, effectively locking-in the profits and putting my LTH back at par. I’ll be ready to add if further opportunities arise at the right levels relative to other factors.
OP and Shel are both continuing to fall under similar but not identical red trends in the following charts:
Brent: https://invst.ly/12iv7q
Shell: https://invst.ly/12iv5z
The difference between the two is mainly in their starting point but OP, unlike Shel, is now testing its low-price trend (green) for a second time, whilst Shel is only now testing lower levels having today fallen through the blue line. In short: their respective red trends are dominating so the odds are in favour of further falls - will green mark the bottom for either or both of them?
End of week: The usual 4 Majors against Brent since last Friday: https://invst.ly/12hwx6
Shel was the worst performer: down 1% with Brent down around 0.5%. CVX and BP actually up
Shel is still within a downward trend (red) and testing the upper blue support here:
https://invst.ly/12hx68 , with 2500 and the more recent green providing the next supporting levels. A winter ‘low’ around 2450 or lower would begin to look distinctly possible if the current pattern continues through next week.
A significant break upwards for OCDO yesterday.
And for those that watch it, the EMA went into 'buy' a fortnight ago and now shows no sign of slipping back, as it often does with shares hovering near a turning point. https://invst.ly/12h0ey
The U.S. Just Recorded Its Highest Oil Production Month In History:
https://oilprice.com/Energy/Crude-Oil/The-US-Just-Recorded-Its-Highest-Oil-Production-Month-In-History.html
For the last decade, OP has been subject to US ‘boom and bust’ cycles which, following the last OP war with OPEC+, were supposedly now under control because US companies that needed to pump ever increasing volumes to service debt had all gone bust and shale production came under the more prudent control of better financed organisations.
Yet OP today still remains vulnerable to US overproduction and depends on OPEC+ reducing production in order to balance supply and demand.
As Presidential election approaches, the current administration would love to see OP nearer $60, so don't expect green policies to keep much of a lid on things.
Addicts don’t like their supplier….
Oil is a necessary evil: society knows it but it’s easier to blame the oil co’s than to accept responsibility and deal with it.
As the week progresses:
Oil is up $2.5 since last Friday’s LSE close but, despite following it up on Monday, oil companies are back down and effectively flat:
https://invst.ly/12cwvo
A lot less volatile than it was in the summer and following a more measured and normal recovery path:
https://invst.ly/12byhm Will resistance at around 610 prove to be a ceiling or a step to the next level?
Perhaps the analysts pointing to levels near 400 were totally wrong. The Q4 Trading statement on 16th Jan will be the next test unless there's more news in the meantime.
.....and the tight link with Brent continued today, with BP doing much the same...https://invst.ly/12byd2 .
This gives a closer look at how Shel has tracked OP since results on Nov 2nd;
https://invst.ly/12beqz
Shel’s sp resisted Friday afternoon’s drop in OP, from which Brent has since recovered. This morning’s sp of around 2630 is consistent with where Shel was in relation to Brent about a week ago
Apart from its spike to 2788 on Nov 3rd, Shel has been mainly influenced by OP and remains in a two week downward trend: https://invst.ly/12aw6v
OP has been heading downwards for nearly a month, Neversell, so continuation of the slide below $80 has been on the cards for a while- especially as it often hits a low around the end of the year. Shel itself was due a pull back and TBH hasn't been hit as badly as some of the others: Here’s Shel v BP and Brent since last December: https://invst.ly/12a5gv .
Prudently selling the peaks and buying the troughs to enhance the dividend income is what makes Shel such a great LTH. I’m still 50% out and looking for the right top-up levels and would probably go overweight if it sinks further than anticipated.
2450 (ie £3 below peak) is a tempting possibility but anything down to the bottom blue line (near 2325) is on the radar as far as I'm concerned.
In the context of yesterday's post, today's break upward suggests that the prospective orange trend I mentioned may have some legs: https://invst.ly/128zv2
The recent price pattern is typical for an sp that is levelling out after a fairly rapid decline.
Of three current trends, red, green and orange here, the sp will break at least one of them tomorrow, with 460 marking the next test if red pushes the sp back below 500:
https://invst.ly/1283kw