Here’s why the Tullow Oil, Shell, and BP share prices are rising

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Written on Apr 3, 2024

Reading time 3 minutes

Energy stocks are in a strong bullish trend this year.
The XLE ETF has outperformed the Invesco QQQ and SPDR SPY.
Shell, BP, and Tullow Oil shares have jumped sharply recently.

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Energy stocks are jumping, helped by the strong performance of crude oil prices. In the UK, the Shell (LON: SHEL) share price surged to a high of 2,737p on Wednesday. BP (LON: BP) surged to 511p while Tullow Oil spiked to 32p, higher than this year’s low of 26.35p.

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XLE vs QQQ vs SPY

Crude oil price is surging

Globally, oil and gas stocks have soared to their all-time highs. As I wrote here, the Energy Select Sector SPDR Fund (XLE) has jumped to the highest point on record. It has outperformed popular mainstream ETFs like the Invesco QQQ and SPDR S&P 500 fund (SPY) in 2024.

The main reason for this performance is that the price of crude oil is gaining momentum. Brent, the international benchmark, is nearing $90 while the West Texas Intermediate (WTI) has soared to over $86.

This means that the price of crude oil has soared by more than 16% this year. There is also a likelihood that the trend will continue now that Brent formed a golden cross pattern on the daily chart.

BP, Shell, and Tullow Oil do well when energy prices are soaring since it boosts their profit margins. Most of these companies are, therefore, expected to publish strong financial results later this month when the earnings season kicks off.

Oil companies to boost profits

Shell made an adjusted profit of over $28.25 billion in 2023. BP, a major British company, said that its profit stood at over $13 billion. Tullow Oil, a smaller oil company with operations in Africa had an EBITDAX of over $1.1 billion.

Analysts believe that the price of crude oil may continue rising this year. There is strong international demand as many countries recover. At the same time, the OPEC+ cartel is still limiting its supply output. This slowdown is being offset by the surge in American production. The US is expected to produce over 14 million barrels per day.

Most importantly, Ukraine is still targeting key Russian energy infrastructure. That is notable since Russia is still a major oil player even with the Western government sanctions. There are still tensions in the Middle East, which could lead to more challenges, boosting prices.

Therefore, most analysts have a bullish view of the price of crude oil. Analysts at Jefferies, Piper Sandler, and UBS have a buy rating on BP. Similarly, those at RBC, Barclays, and UBS have a buy rating on Shell.