BP and Shell share prices continued their downward trend today, reaching their lowest levels since February 27. BP dropped to 472p, down by 22% from its highest point this year, while Shell slipped to 2,900p from the year-to-date high of 3,592.
BP and Shell shares are falling as crude oil prices dive
Energy stocks have retreated sharply after the US and Iran reached a major deal to end the war, leading to lower crude oil prices.
Data shows that the SPDR Energy Select Sector ETF (XLE) dropped to $54 from the year-to-date high of $63. Top names like ExxonMobil and Chevron have continued falling this month.
Crude oil prices have continued falling this month, with Brent and the West Texas Intermediate (WTI) falling to $73 and $70, respectively. Natural gas has continued falling this month, as supplies continue rising.
Therefore, there is a likelihood that their profitability will remain under pressure in the coming quarters as energy prices continue falling.
There is a risk that crude oil will continue falling as supplies from Gulf countries continue soaring. Tens of ships are passing through the Strait, flooding the world with oil at a time when China is no longer buying as much oil as it used to buy before the war.
The only risk facing the energy market is that the truce between the US and Iran may end in the near term. Just on Wednesday, Iran announced that it shot down a tanker that attempted to cross the Strait of Hormuz. There is also a risk that Israel will work to interfere with the deal in a bid to push the US and Iran back to war.
BP and Shell benefited from the elevated oil prices
Energy stocks jumped after the start of the Iranian war as crude oil prices jumped from $50 to $126, the highest level in years.
This surge helped them to announce huge profits and boost their dividends and share buybacks. In a recent statement, BP said that its profit for the first quarter rose to over $3.8 billion from a loss of over $3.4 billion in the fourth quarter. Its profit was much higher than the £687 million profit it made in the first quarter of last year.
BP’s operating profit jumped to $2.86 billion from the $2.83 billion it made in the same period last year. As a result, the company sold its Gelsenkirchen refinery, reducing its costs by over $1 billion. Just recently, BP announced that it was replacing its chairman, Albert Manifold.
Shell, on the other hand, published strong financial results, which showed that its adjusted earnings rose to $6.9 billion, helping the company start a $3 billion share buyback program and increase its dividend by 5%.
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