We recently published a list of 10 Oil Stocks with Biggest Upside Potential According to Analysts. In this article, we are going to take a look at where Shell plc (NYSE:SHEL) stands against the other oil stocks with biggest upside potential.
In an interview with CNBC on November 26, Daan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, discussed the current state of the oil market and the potential impact of a ceasefire in the Middle East on oil prices.
Struyven noted that while the geopolitical risk premium in oil prices was fairly modest, he thinks that the market is focused on risks with a clear path to lower production. The market has not yet fully priced into this possibility, and the current price of oil is too low compared to inventory fundamentals.
Struyven pointed out that global oil inventories have edged down this year, and the market has been in a deficit of around 0.5% of global markets. He thinks that many oil investors are pricing in a large surplus for 2025, which Struyven believes is not done yet and he sees significant upside risk to prices in the short term, potentially coming from lower production from Iran.
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Struyven noted that while the Trump administration’s goals are achievable, they are largely driven by technological advancements and LNG export plans that are already underway despite any policy change. He also agreed that the big oil companies are not eager to spend more money on production on current oil prices.
Struyven also highlighted OPEC’s influence on the market, emphasizing Saudi Arabia’s preference for higher oil prices. He suggested that OPEC would likely defend a price floor of around $70 per barrel but would not hesitate to increase supply if prices climb above $80. This aligns with his expectation that oil prices will remain within a range of $70 to $85 per barrel.
Finally, Struyven attributed the changes in the oil market to the success of US shale production, which has accounted for 100% of global oil production growth over the past decade. This has put downward pressure on long-term prices, making it less likely for oil prices to spike above $100 as they did in the past.
The oil market is influenced by a range of factors, including geopolitical risks, production levels, and OPEC’s strategies. The potential for a ceasefire in the Middle East, for example, could impact prices, but the geopolitical risk premium is still relatively modest. Despite this, oil prices remain lower than expected based on inventory fundamentals. While these dynamics shape the near-term outlook, long-term oil price increases above $100 are less likely due to the impact of US shale production, which has accounted for all global oil production growth over the past decade.
A gas refinery lit up against the night sky, showing the scale of the company’s petrochemical operations.
Our Methodology
For this article, we sifted through Energy ETFs and online rankings to form an initial list of 35 Oil stocks. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential, as of November 29. We also included their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Shell plc (NYSE:SHEL)
Upside Potential: 25.04%
Number of Hedge Fund Holders: 48
Shell plc (NYSE:SHEL) is a multinational energy company with a diversified portfolio in oil, gas, and chemicals. The company earns revenue through the exploration, refining, and marketing of hydrocarbons, as well as from its growing renewable energy segment. Shell plc’s (NYSE:SHEL) clients range from retail consumers to large industrial buyers. The company is investing heavily in renewable energy sources like solar, wind, and hydrogen while transitioning toward net-zero emissions. Its long-term strategy involves decarbonizing its operations and leveraging digital innovation to improve efficiency.
Shell plc (NYSE:SHEL) has successfully commenced operations at Mero 3 in Brazil and finalized the divestment of Shell Pakistan. These strategic moves have strengthened its portfolio, positioning Shell plc (NYSE:SHEL) to capitalize on future growth opportunities. Shell PLC (NYSE:SHEL) has also showcased remarkable cost-cutting initiatives and operational efficiencies, which significantly bolstered its financial performance.
Aiming to address evolving energy demands, Shell plc (NYSE:SHEL) continues to focus on its core strengths in LNG and low-carbon oil. The company prioritizes customer-centric solutions and leverages its robust trading capabilities to enhance its competitive edge. Shell plc’s (NYSE:SHEL) CEO has emphasized the importance of dynamic capital allocation, highlighting the company’s strategic approach to seeking value across the energy system.
Overall, SHEL ranks 7th on our list of oil stocks with biggest upside potential according to analysts. While we acknowledge the potential of SHEL to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SHEL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
