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Shell shares are up 14% but is the price set to depreciate?

Shell shares continued their positive start to the year with a quick move towards £15 today. However, with Covid-19 continuing to hurt oil prices and energy needs shifting, analysts are split on what could happen next.

  • Shell share price gains 14% in 2021
  • Can Covid-19 vaccines help short-term value?
  • Is a reliance on oil and gas hurting the long-term value of Shell shares?
  • Looking to trade Shell shares? Open an IG account

The Royal Dutch Shell (RDSa.L) share price opened at £14.72 on 19 January and quickly climbed to £14.82 before a small reversal. The current valuation is 34% lower than it was this time last year: a time when Covid-19 wasn’t shutting down economies. However, Shell share price charts have made for positive reading since the start of the year. After closing 2020 at £12.97, the energy company’s shares have improved by more than 14%.

Shell share price bullish, for now

What’s more, a peak price of £15.03 on 14 January suggests we’re in the midst of a bullish trend. Analysts at JPMorgan Chase seem to agree. The company’s most recent analysis on 15 January reiterated a buy rating. According to the investment bank, investors should be looking towards a Shell share price target of £18.00.

However, a consensus of 15 other investors puts the median price target closer to £16.30. This air of caution may be due to ongoing concerns surrounding Covid-19. Although vaccines are offering hope of a return to normality, oil prices remain low.

Crude oil is currently trading around $52.00 a barrel. That’s higher than it’s been in recent months. However, it’s still lower than the $60+ we saw pre-pandemic. If demand doesn’t increase as expected, Shell shares may lose momentum as we move through 2021.

Will Shell shares ever return to full strength?

For its part, the company is streamlining. It announced on 15 January that it has sold a 30% interest in oil mining lease 17. The site, located in the Eastern Niger Delta, was offloaded for $533 million. Divesting of assets may help buoy Shell shares in the short term and, potentially, help future investments in renewable energy.

The latter part is where analysts see the greatest challenges occurring. A return to normality in 2021 could fuel a Shell share price recovery in the short term. But, if it can’t pivot away from oil and gas, it may become an ever-shrinking entity within the energy sector. We are certainly seeing some positive signs at the moment. The question now, however, is can Shell evolve and get back to its pre-pandemic highs, or is a long-term bearish trend inevitable?

Do you think the Shell share price rise will continue?

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Open an account to start trading or investing in UK shares, including Shell.

Footnotes:

1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
2 Deal three times or more in the previous month to qualify for our best rate.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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