The holiday weekend may be finished, but gas demand is anything but. As vacation season sparks up in the United States, people will be eyeing gas pumps intensely to see how much their travels will set them back. The bad news for travelers is it may run more than expected, as Shell (NYSE:SHEL) sounded an alarm on oil and gas production. The outcry was enough to send Shell share prices down significantly in Thursday afternoon trading.
Shell made it clear: it would be “irresponsible” to reduce supply of oil and natural gas at a time when the world economy is dependent on these days. Shell CEO Wael Sawan noted that it was simply a matter of reality that “…the energy system of today continues to desperately need oil and gas.” Sawan further noted, much to the dismay of U.N. Secretary General Antonio Guterres, that “…we need to make sure we have developed the energy systems of the future” before oil and gas are no longer needed.
The EIA Weekly Petroleum Status Report spells it out quite clearly: inventories across the board are in open decline. Crude inventories were down 1.5 million barrels, and gasoline inventories were down 2.5 million barrels. Even distillates were down significantly, around a million barrels down. In fact, with the Saudis and the Russians cutting back on oil supply, OPEC is putting out the call for new oil-producing nations to join in. While OPEC brass kept mum on who might join, a list of recently-visited countries included Malaysia, Brunei, Azerbaijan, and even Mexico.
Shell enjoys excellent analyst support and stands as a Strong Buy thanks to nine Buy ratings and one Hold. With an average price target of $71.18, Shell stock also offers investors 21.63% upside potential.
