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Shell share price analysis amid oil market woes

Shell (LON: SHEL) share price has come under intense pressure as the crude oil market faces elevated risks. The stock plunged to a low of 2,300p, which was about 10% below the highest level this month. It has risen by over 22% from its lowest level in July.

Oil market anticipates shocks

The crude oil market is bracing for one of its biggest shocks this year as western powers seek to put limits on Russia’s oil exports. Next week, Europe will start blocking Russian seaborne crude from the continent because of its ongoing war in Ukraine.

At the same time, western countries will start putting a cap on Russian oil prices. These sanctions will stop European companies from insuring vessels carrying Russian oil to other countries. Insurance companies will only offer insurance only if the receiving countries accept prices set by western powers. 

It is unclear how whether these sanctions will work and their impact on oil prices. Besides, the last sanctions have barely dented Russia’s oil exports. Still, most analysts believe that the coming week will be pivotal period for oil prices.

Crude oil prices have also been under pressure as investors focus on the ongoing Covid-19 protests in China. Residents in major cities like Beijing and Shanghai have poured in the streets in the past few days as concerns about the lockdowns continue.

China, the biggest oil importer, has been in a major lockdown as the number of Covid-19 cases surged. It is unclear whether Chinese authorities will give up on their strategies. After rising to $135 earlier this year, Brent has dropped to $81 while West Texas Intermediate (WTI) has plunged to $74.3. 

Shell, like other energy majors makes more money in periods of elevated oil prices. Meanwhile, natural gas prices crashed by more than 4% on Monday. Shell is one of the biggest natural gas players in the world.

Shell share price forecast

Shell stock chart by TradingView

The 4H chart shows that the Shell share price has pulled back in the past few days. In this period, it has managed to move from this month’s high of 2,557p to 2,290p. It has formed a head and shoulders pattern, which is usually a bearish sign. The stock has also dropped below the 25-day and 50-day moving averages.

Therefore, the stock will likely continue falling as sellers target the next key support level at 2,200p. A move above the resistance point at 2,385p will invalidate the bearish view.

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