Royal Dutch Shell share price is under pressure as lower oil prices continues to cause intense pressure on the firm. The company’s class A shares ended the day at 983p, the lowest level since March 2019. Other energy giants are also struggling, with BP share price trading at the lowest level in more than two decades.
Royal Dutch Shell stock is reacting to relatively low crude oil prices. The price of Brent crude oil is down by more than 1.20% and is trading at $41.00. That is a substantially lower price from last week’s high of almost $43. Similarly, West Texas Intermediate (WTI) is down by more than 1% and is trading at $38.
The challenge for Shell and other oil producers is that they are fetching a lower margin for the oil they produce. Worse, the price is substantially lower than the overall target the firms have set. This long-term target is how the firms measure the value of their crude oil. Indeed, in July, because of low prices, the company made a $22 billion write-down of its assets.
At the same time, the second wave of the coronavirus pandemic has not helped. In recent days, the number of cases in some countries like the UK, Spain, and Italy have seen the number rise. As a result, OPEC, IEA, and EIA have all slashed their oil demand forecasts for the year.
The company has also announced several measures to deal with the crisis. It has cut its dividend, reduced its capital expenditure, and announced significant cost cuts. And, it is expected to do more. According to the Times, the company is planning to announce thousands of job cuts as it shifts to green energy.
Still, analysts are relatively optimistic about the Royal Dutch Shell share price. A look at the recent analyst calls show that most of them expect that the price will soar. For example, analysts at Credit Suisse expect the stock to climb to about 1,600p while those at UBS have a buy rating. Those at Jefferies, JP Morgan, and HSBC expect the stock will continue rising.
The monthly chart shows how deep the unloved Royal Dutch Shell share price has fallen. The stock is a few points above its multi-decade low of 951p. Also, the price has fallen in the past 9 consecutive months. It remains below the 50-month and 25-month exponential moving averages. Also, the RSI has fallen to 19, meaning that it is the most oversold since May 2003.
Still, I suspect that bears will remain in control as they push it to the lowest level in more than 2 decades. However, a move above this month’s high of 1,100p will invalidate this trend.
