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This bad news should encourage you to avoid Royal Dutch Shell plc!

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By The Motley Fool  Nov 7, 2016

Deal in danger

My bearish view on Royal Dutch Shell (LSE: RDSB) hasn’t improved over the weekend, either, following news of fresh bickering between OPEC members.

On Monday, OPEC’s Mohammed Barkindo was forced to deny that the wheels are not falling off its much-lauded supply freeze agreement, with the group’s secretary general announcing that all 14 member states remain committed to the deal.

But rumours that Saudi Arabia vowed late last week to raise its own production, should members fail to rubber-stamp the deal this month, negates any suggestion of cross-cartel unity. Some members like Iran have been exempted from cutting, or even holding, their own production, causing other group members to publicly call for similar exemptions. The political and economic ramifications of getting an agreement over the line are clearly colossal.

An OPEC deal is desperately needed to get Shell bouncing back into profitability, particularly as the US rig count continues to rise and Russia also keeps the pumps switched up around full capacity.

Given that market oversupply is in danger of persisting well into the future, I reckon crude majors like Shell are a risk too far for canny investors.

Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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