Key events impacting SHELL

JohnL
2022-10-08

$SHELL PLC SPON ADS EACH REPR 2 ORD SHS(SHEL)$ had a rough week since 2 major events took place. OPEC+ decided to cut 2 million barrels production. To put it into context, 2 mil is not necessarily the actual production as most of its members are below production target. Hence, it is fair to say the real impact is ~1mil cut, which is equivalent to 1+% of world supply. $Light Crude Oil - main 2210(CLmain)$ responded favourably last 2 weeks. SHELL ADR closed post market at 54 after the production cut. However, the Oil and Gas giant disclosed Q3 '22 advance notice the next day, highlighting impact of price volatility and margin shrink. 5% drop were observed throughout the trading day.

US release of oil SPR is expected to stop in Oct, and the White House is willing to give way to Venezuela oil allowing $Chevron(CVX)$ continuing operations. 

I am long SHEL by selling Put at 52.50. In my view, the upside is 58, and floor is set at 48 in the next 3 months. Let us see how the Russian oil price cap change the dynamics. 

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • EvanHolt
    2022-10-11
    EvanHolt
    Price fluctuations have a great impact on shell's profits.
    • JohnL: 
      Agree. There are only that much of hedging a company can do. Not to mention the strong USD.
  • HilaryWilde
    2022-10-11
    HilaryWilde
    The hope is that the cuts will boost crude prices.
    • JohnL: 
      Winter is coming and it seems like Europe is stocked up, albeit painful. OPEC+ took the shot, let's see how US respond, whether continues SPR release, or Iran / Venezuela oil will come into the market.
  • Maria_yy
    2022-10-11
    Maria_yy
    I also think it's a good idea to be long SHELL now.
    • JohnL: 
      PE of 5.x is a screaming buy if this is a US stock. There is a decent discount compared to its peers, which is justifiable given the geographical and political exposure.
  • ElvisMarner
    2022-10-11
    ElvisMarner
    I believe shell will find support around 52.
    • JohnL: 
      Hope so too. I have been in and out within the range of 48 to 55.
  • DonnaMay
    2022-10-11
    DonnaMay
    Selling put is a smart choice, and I do it too.
  • Bigsweaty_
    2022-10-11
    Bigsweaty_
    Good to know i was considering oil investment
Leave a comment
32