Shell, BP, and other energy stocks jump as crude oil prices rebound

BP and Shell shares have staged a strong comeback this week, helped by rising crude oil prices. BP jumped to 505p, its highest point since June 22, and 12.2% above its lowest level this year.

Similarly, Shell stock pumped to 3,109p, up by 8.6% from its lowest point this month. Other energy stocks like Chevron, ExxonMobil, and Marathon Petroleum also bounced back, with the Vanguard Energy ETF (VDE) soared to $161.5, its highest level since June 12. It has rebounded by almost 9% from its lowest level this year.

Shell, BP, and VDE ETF stocks | Source: TradingView

Crude oil price jumps as Iran war resumes

BP and Shell shares have bounced back this week, helped by the resumption of the US-Iran war. In a statement on Monday, Trump said that the US would resume its blockade against Iranian ports, and that the military would escort ships and charge a fee. Such a move will be difficult to execute because of Iran’s capabilities in the region.

The two sides have continued fighting this week, a situation that may escalate in the coming weeks, which explains why oil prices have soared. Brent, the global benchmark, has soared by 20% from its lowest level this month, and is now hovering at its highest point since June 15. West Texas Intermediate (WTI) has also risen by nearly 20% from the YTD low.

Soaring oil prices will be bullish for energy stocks, which have been under pressure in the past few weeks since the US-Iran ceasefire started. Shell dropped from 3,308p in June to 2,865p on July 2. BP also slipped to 450p, its lowest level since February 11.

Shell and BP benefited from the US-Iran war

Energy stocks jumped as the US-Iran war started a few months ago, with oil and gas prices soaring. In a recent note, Shell said that output from its integrated gas division would be between 610,000 and 650,000 barrels of oil equivalent per day (bped) in the second quarter, higher than the previous guidance of between 580,000 to 640,000. Shell will release its final Q2 numbers on July 29.

Other energy companies have reported strong numbers, with ExxonMobil saying that its second-quarter earnings will see a $5 billion boost compared to the first quarter. BP is also expected to have benefited as oil prices soared.

Looking ahead, the main catalyst for these stocks is how the US-Iran crisis evolves. Signs that it will escalate further will boost their shares as oil prices will soar. Besides, this is happening at a time when inventories are at dangerously low. In a statement in May, a top Exxon executive said:

“We’re approaching unheard of inventory levels. You can debate whether that’s going to hit, those really low levels, in two weeks or three weeks. Once you get to that point, then you’ll see price shoot up.”

He explained that Brent and WTI could surge to between $150 and $160 if inventories continue falling. Worse, an escalation could see the US and Iran start shooting at energy infrastructure in the region, which will take a longer time to recover when the war ends.