Shell heads lower after gas hit

Top mega-major’s price return this year could be most minor among peers

Top mega-major’s price return this year could be most minor among peers

Shell posts some of the most disappointing quarterly figures from a supermajor due to its outsize link to the over-supplied gas market. Its shares are slumping more than most rivals did after their results in recent days. The stock has been pinned lower for the whole session and was last down 5.7%, its worst one-day drop since October.

LNG prices during the quarter were about 40% lower than in the year before. Given that they prices have continued to fall, taking the cost of the fuel in Asia the lowest in a decade, Shell's outlook for the current quarter is also challenged.


  • Adjusted net income was $3.46bn down 26% from a year earlier, missing the low end of forecasts and the biggest miss since 2016
  • Cash flow from operations—closely watched by analysts—still rose 16% from a year earlier to $11.03bn. However it was flattered by a $600m working capital movement

CEO Ben van Beurden has maintained 2019 guidance in light of the earnings and declared the group on track to achieve a 2020 organic free cash flow goal of $25bn-$30bn, enabling $25bn in buybacks. Yet with the dividend in the quarter and buybacks of $3.8bn and $2.1bn respectively not covered from cash, investor concern is rising, if not yet at anxiety levels. From a peak that was 13.5% higher for the year in June, RDSA’s 7% slide since, including Thursday, trims price return even more. Investors can be expected to hold off further in the second half. Though fellow ‘mega-majors’ Exxon, Chevron, BP and Total are also turning lower for the year, Shell looks likely to underperform.

Chart thoughts

RDSA continues to hug the topside of its secular uptrend from the bottom of the crude oil price slump in December 2015. It is also just a moderate amount, around 10%, below 1st May’s cycle high. So there’s little sense of  alarm here. There’s no mistaking the end-of-phase feel of right now though. The pristine May-to-July rising line has been obliterated by Thursday’s slump. 14-day Relative Strength Index is also plummeting. Support is visible at the zone of consolidation that may have a ceiling at the 23rd May close. (See candle in red ellipse). That would be invalidated if price pierces the bottom of the range, codified as the 8th May close of 2376p. That price is significant as it marked the beginning of 10 successively higher daily highs. A close above the 61.8% marker referencing the May-July move now seems unfeasible. Together with Thursday’s gap and fierce sell-off, deep follow-through looks likely. If seen, that would bring in May’s 2368p on 7th May as the next downside target.

Royal Dutch Shell CFD – daily

Source: City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.