Shell share price forecast: Cheap RDSB could surge ahead

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jan 7, 2022
  • The Shell share price has started the year well.
  • It has risen by about 12% from its December lows.
  • The stock could keep rising in light of the $5.5 billion buybacks.

The Royal Dutch Shell (LON: RDSB) share price rose to the highest level since October last year. It is trading at 1,722p, which is about 12% above the lowest level in December. Other oil and gas stocks like BP and ExxonMobil have also done well.

Shell buybacks

The Shell share price has done well, supported by the relatively high crude oil and natural gas prices. The price of crude oil has jumped this year as investors downplay the impact of the Omicron variant to the global economy. Recent data shows that the variant is relatively milder than the previous variants.

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The stock is also doing well after the company unveiled its plan to return funds to shareholders. It will buy back stock worth $5.5 billion using the funds it raised after selling its Permian Basin operations to ConocoPhillips.

These distributions will be in addition to the existing buyback plan that involves repurchasing stock using between 20% and 30% of its total cash flow. In a statement, the company said that it will report between 910k and 950k barrels of oil per day for the fourth quarter and about 7.7 million to 8.3 million mt/day of LNG. This guidance was lower than the previous one.

Analysts are optimistic about the Shell share price because of the rising demand and the fact that oil and gas prices have been stable. The company is also taking actions to reduce costs. For example, last year, the company said that it will shift its headquarters from the Netherlands to London.

In a recent article, Barron’s mentioned Shell as one of its picks for the year. They cited the company’s discount to its American rivals and the fact that it is a leading gas producer. Natural gas prices have been in a strong bullish trend lately.

Shell share price forecast

shell share price

On the daily chart, we see that the RDSB share price crossed a key resistance level this week. The stock managed to move above the key level at 1,705, which was the highest level on December 7th. It also jumped above the 25-day moving average and is slowly approaching its highest level in 2021. The MACD has also moved above the neutral level. 

Therefore, the stock will likely keep rising as bulls target the key resistance at 1,850p. This view will be invalidated if the stock crashes below 1,600p.

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