With a gradual easing in lockdown restrictions around the world, the stock prices of Shell and BP increased last Tuesday, May 5 as oil prices began to recover, boosting the FTSE index in the process.
The gains follow the S&P500’s move into the positive before the close of US trading and overnight gains in the Asian markets. Other European markets also saw gains, having been buoyed by the easing of restrictions in Spain and Italy, as well as a potential phased reopening of the British economy. This should increase demand for Shell’s and BP’s oil-based products like fuel and commercial vehicle oil.
A City Index Analyst, Fiona Cincotta, said about the bounce back:
“While April was all about the collapse of demand and approaching storage capacity limits, expect May and June to be about rising demand and rising storage capacity as more oil is consumed.”
She added that she expects demand to slowly increase as economic activity picks up again but cautioned against excessive optimism, saying:
“…any rapid bounce back is looking highly unlikely. This will be a gradual advance, unless Opec manages to pull together another production cut.”
At the time of writing, Royal Dutch Shell PLC’s share price was still up 6.32% on the day after giving up some earlier gains, with BP PLC having made similar gains. The price of Brent crude was also up over 10% on the day as investors focused on the possible end of the pandemic’s most severe economic effects.