Shell Share Price Outlook as Natural Gas Prices Recoil

Shell share price has pulled back slightly recently even as the company’s fundamentals remain solid. The stock was trading at 2,358p on Tuesday, slightly lower than the year-to-date high of 2,554p. In the United States, Shell ADR stock price was trading at $54.65, lower than this year’s high of $57. 

Natural gas prices retreat

Shell is one of the biggest oil and gas supermajors in the world. The firm has operations across the value chain. It has upstream, downstream, and middle-stream operations around the world. Shell is also a leading energy trader and manufacture of petrochemicals.

Therefore, Shell and other energy companies have done well this year because of elevated prices. Crude oil has consistently remained above $80 per barrel. Similarly, the company has benefited substantially by elevated natural gas prices. The average natural gas price has been about $7.05/Mcf, more than double where it started the year at.

Shell has reported strong results this year. In the most recent quarter, the company said that its revenue surged by 59% to $95.75 billion. Its CFFO was $12.5 billion. The company has also been disciplined, with its capex for the year expected to be between $23 billion and $27 billion. It is also rewarding its shareholders with a 15% increase in dividends and an additional $4 billion share repurchase program.

Shell share price has eased recently for two main reasons. First, there are concerns that many governments will impose a windfall tax after the company’s robust business. Second, investors are afraid of the cyclical nature of the energy market, which could see prices retreat. Indeed, natural gas prices have declined sharply recently. This is notable since Shell is one of the biggest players in the natural gas industry.

Shell is also investing in green initiatives. It runs one of the biggest electric car charging network and is building Europe’s biggest hydrogen plant in Rotterdam. Shell has also invested heavily in carbon capture research and is also an upcoming player in the wind business. Shell’s renewables brought in $1 billion in adjusted EBITDA. This is a small figure but one that is growing.

Shell share price forecast

The 4H chart shows that the SHEL share price has been under pressure in the past few days. It has retreated from this month’s high of 2,555p to 2,360p. Along the way, the 25-day and 50-day moving averages have made a bearish crossover pattern. It has also moved slightly below the important support level at 2,395p, the highest point since August 30th. 

Therefore, while Shell has strong fundamentals, there is a likelihood that it will continue recoiling as sellers target the key support at 2,235p. A move above the resistance at 2,395p will invalidate the bearish view.