BP and Shell rebound after oil prices rise

Both oil and gas majors have seen their shares rally in reaction to oil prices stabilising after weeks of decline, with investors likely to view BP and Shell as good long-term holds.

Oil prices have finally found a bid today, with traders reacting to the Trump claims that he could bring Russia and Saudi Arabia around the table in a bid to ease the current oversupply situation.

The possibility of such a breakthrough has always provided the possibility of a spike in energy prices, yet for the moment it is a case of relying on the word of the US president.

With subsequent commentary from Russia signalling that no such talks are planned for the coming days, we are seeing oil prices move lower somewhat. However, the sharp rise seen in oil producers today does highlight the likely outperformance in the sector once we do see prices start to rise.

Interestingly, even though oil prices are being hit by a double whammy of rock bottom demand and sky-high output, many investors are going to be bullish around these levels given the long-term upside potential.

Oil will remain in demand in the years ahead, and thus the current predicament the likes of BP and Shell find themselves in is likely to be a short-term issue rather than something which could see them go bust.

BP: technical analysis

BP shares have broken through an inverse head and shoulders neckline, with the break through £3.49 providing the highest level for this stock since the 9 March gap lower, according to Josh Mahony, senior market analyst at IG.

With oil prices falling back, there is a chance we could see further short-term downside. However, we would need to see a break below £2.49 to bring about a more bearish outlook.

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Royal Dutch Shell: technical analysis

‘Shell shares have similarly rebounded today alongside oil prices. A bearish phase could come into play over the short-term if we see further downside in crude,’ Mahony said.

‘However, we will need to see a break below the £13.94 level to bring about a renewed bearish outlook. Until then, further upside could come into play if Russia and Saudi do come back to the table to resolve the current deadlock’ he added.

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