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Where now for the BP and Shell share prices as oil prices hit profits?

Both oil majors fell victim to lower production and weaker oil prices which weighed on third quarter profits, sending shares downward.

BP and Shell have seen their share prices weighed down by lower production and weaker oil prices, which have also hurt both companies’ profits.

Last week, BP and Shell published their third quarter earnings, with underlying profits down 32.5% and 15% respectively, reflecting challenging market conditions faced by both oil majors.

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BP and Shell shares remain resilient despite falling oil prices

Brent crude fell to an average of $62 a barrel in Q3, down from more than $75 a barrel a year ago, driven by weaker demand and a slowdown in global economic activity.

Despite weakening oil prices, BP and Shell shares have remained resilient, with both stocks down just 5% over the last 12 months of trading.

You can go long or short BP and Shell with IG using derivatives like CFDs and spread bets.

Despite challenging market conditions for both companies, analysts expect their share prices to rise. Société Générale reiterated its ‘buy’ rating for Shell in November and issued a target price for the stock of £27 a share.

Meanwhile, Jefferies International and Berenberg analysts gave ‘buy’ ratings to BP in October, with both issuing a target price of £5.90 a share. DZ Bank was the most optimistic of all, providing a £6 a share target for the stock.

Dividends under pressure due to declining oil prices

Both BP and Shell are under pressure from investors to grow cash flows, reduce their debt piles and continue to return value to shareholders with rising dividends.

However, the price of oil will ultimately determine their ability to meet investors’ demands. But with political and economic instability remaining high, the price of the black stuff is fickle.

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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