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BP and Shell fortunes diverge, while oil prices crash on trade fears

A mixed outlook for the oil market makes life difficult for UK oil titans BP and Shell but there are signs that BP may have a stronger set of foundations for further growth.

Shell Source: Bloomberg

This week has seen BP and Shell report earnings, but the two oil titans appear to be faring very differently. BP beat expectations, but Shell suffered its worst performance since the oil price crash.

BP Q2 earnings beat expectations

At BP, second quarter (Q2) earnings were $2.8 billion, in line with the previous year but ahead of the forecast $2.5 billion. Production was up 7% to 2.6 million barrels per day. Divestments continue, with BP still on track to hit $5 billion in asset sales by the end of the year. The better figures have pointed towards the prospect of increased dividend payouts from the firm.

Shell posts underwhelming profits

Meanwhile, Shell suffered a 25% fall in profits to $3.5 billion, well below the forecast $5 billion. Like BP, it increased production, but blamed a weaker global economic outlook, plus a sharp drop in gas export prices, of which Shell is a key supplier.

Despite rising tensions between Iran and the US, oil prices have been hit hard by renewed trade tensions between the US and China. Hopes of a continued rally in oil prices have been dashed, with the price continuing to push lower after peaking above $65 at the end of April. Since then we have seen lower highs, as continued US shale production increases help limit any rise in the price.

BP and Shell shares: technical analysis

Despite rallying in the wake of its earnings, BP’s share price has gone nowhere over the past year. Rallies towards £5.80 have found resistance, and aside from the Q4 dip to 480p, weakness to £5.20 usually finds buyers.

BP chart Source: ProRealTime
BP chart Source: ProRealTime

By contrast, Shell has risen steadily over the past two years, from £19.00 in the summer of 2017 to over £26.00 at the beginning of August 2019. Weakness in July meant that a push to the 2018 high at £26.80 has been defeated for now, and the series of higher lows seen since the beginning of the year has been brought to an end. Further declines would challenge support at £23.34, £22.70 and then £21.92.

Shell chart Source: ProRealTime
Shell chart Source: ProRealTime

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