Oil bigi Royal Dutch Shell (LSE: RDSB) The share price has risen 4% so far in today’s trading. At 1485p, its share price is now at a level not seen since mid-March this year. To me, this raises two questions. The first is why is this happening? And the second question is what to do next – buy, sell or keep?
Why are Royal Dutch Shell share prices rising?
First, let’s consider what happened. I would be tempted to think that investors are rushing to buy today after yesterday’s stock market correction. The FTSE 100 The index fell about 2.4% yesterday compared to the previous week, due to a fairly consistent weakness. Shell stock was also a loser, to be sure. But last week it lost 1.7%, much lower than the broader market.
I think the run-up today is another plan to sell its business in the Permian Basin of the United States to Hinocarbin Explorer ConocoPhillips. The sale will bring in ড 9.5 billion in cash for the shell and has been in the process for several months. One reason for this is that it allows the company to focus on its most profitable oil and gas operations.
Is becoming more environmentally friendly
This sale can also be seen in the context of the goal of turning the net-zero mission navigation energy business by 2050. In fact, it is under increasing pressure to do so. A recent court ruling in the Netherlands called for a major reduction in its global carbon emissions in less than a decade. Although Shell has challenged the ruling, it could speed up the process.
In addition to selling oil fields in the United States, the company is moving towards clean energy. It simply said that it would create a large biofuel facility in Rotterdam, the Netherlands. It will produce sustainable aviation fuel and renewable diesel, which is low carbon fuel. It recently undertook its first renewable project in the Middle East, with the Kabas Solar Center in Oman. And these are just a few examples of the ongoing changes for him.
What’s next for shell stock?
It remains to be seen how successful it will be in becoming a renewable giant, as it is today in the oil and gas sector. I think this is a worrying suspicion that has kept its share price relatively low despite the sharp rise in oil prices over the past year and the consequent improvement in both its own performance and prospects. Its share price is still about 5% below its pre-epidemic high in January 2020.
Another reason may be that its dividends are still low. Its dividend yield is 3.8%, which is similar to the average FTSE 100 Yield but it is much lower than its double-digit pre-epidemic production.
I think as it continues to move towards carbon neutrality and increases its dividends further, its share price could rise. I have already bought it and think it is a good stock for the future. So, this is a buy for me.
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Manika Premsingh owns shares in Royal Dutch Shell B. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.