The U.S. government has given approval to integrated energy major Royal Dutch Shell plc (RDS.A) to export light crude oil. The condensate requires minimal processing.
Shell added that its ultra light crude to be exported qualifies as a refined product. But, has the government approval come at the right time?
The pricing environment of oil has been anemic for more than six months. In fact, the price of crude has plunged more than 57% since June last year. This is primarily owing to plentiful supply of the commodity in the face of lackluster global demand. Yesterday, West Texas Intermediate (WTI) crude closed at $45.89 per barrel, the lowest level since April 2009.
Most importantly, oil price is not expected to recover any time soon. Investment bank, The Goldman Sachs Group Inc. (GS) declared this week that it expects WTI to trade at $40.50 a barrel in the second quarter of 2015, significantly lower than its previous projection of $70 per barrel.
Shell has thus chosen to wait for a recovery in the prices of light crude instead of jumping on the approval.
Shell – expected to release fourth-quarter 2014 results on Jan 29, 2015 − has operations all over the world. It is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.
Currently, Shell carries a Zacks Rank #5 (Strong Sell), indicating that it will substantially underperform the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Seadrill Partners LLC (SDLP) and Enbridge Energy Management LLC (EEQ). Both stocks sport a Zacks Rank #1 (Strong Buy).
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