So just how low could the share price go next year? Well, Shell shed almost 50% of its value in the 18 months from June 2014, a period in which Brent values slipped from $115 per barrel to below $30. It’s time to fear the worst, I think.
Royston Wild: Fool.co.uk: 16 August 2019
Prices in freefall
It’s quite possible that the diplomatic and military conflict between Iran and the US could really blow up in the months ahead, providing oil prices — and with them the share values of producers like Shell — with the kind of boost that we saw in the spring.
All things considered, though, the odds are stacked firmly against the oil drillers. The probability of frosty US-Chinese trade talks seeping into 2020 spell disaster for a global economy already in the throes of a slowdown, and with it the profits outlook for the likes of Shell in the medium term, at least as energy demand slumps.
Latest news surrounding the International Energy Agency certainly provides plenty more to worry about. The body hacked back its demand estimates through to the end of next year following reports that worldwide oil demand grew at its slowest rate since 2008 between January and May. And this is particularly worrying as production from major producers like the US continues to grow, swamping the market with more unwanted material.
That 25% first-half profits drop that Shell announced at the start of the month, a result caused by slumping prices across the business, is unlikely to be the last awful update to come from the firm as the supply/demand situation worsens.
So just how low could the share price go next year? Well, Shell shed almost 50% of its value in the 18 months from June 2014, a period in which Brent values slipped from $115 per barrel to below $30. It’s time to fear the worst, I think.
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