Royal Dutch Shell shares: is this a great time to buy?

Royal Dutch Shell shares faced a torrid 2020, due to the fall in oil demand. But with oil prices now much higher than before, is now a good time to buy?

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Oil stocks were some of the worst performers of 2020 and many oil companies are struggling to survive. The Royal Dutch Shell (LSE: RDSB) share price itself is still 50% off its peak. However, the past few weeks have been slightly more favourable to oil stocks. Indeed, the price of Brent crude oil has now hit $56 per barrel.

I also believe that Shell’s recent decision to acquire the electric vehicle (EV) charging company Ubitricity is a sign of progress. As such, with demand potentially continuing to increase throughout 2021, is it the right time for me to buy Shell shares?

The deal to buy Ubitricity

Although it was only announced yesterday, and the sum has not yet been disclosed, I believe that the deal to buy Ubitricity is a shrewd piece of business. This is despite the fact that Shell shares fell 3% on the day.

Ubitricity operates the largest public EV charging network in the UK, and has also seen growth in France and Germany. I think the move to buy the company comes at a good time. Boris Johnson recently announced that the sale of new petrol and diesel vehicles would be banned from 2030. A number of car companies, such as Volkswagen and Renault, have also increased electric car production this past year.

This acquisition demonstrates Shell’s expansion into this fast-growing market. It also represents the company’s commitment to a net-zero emissions business. With climate change such a prominent issue within society right now, I believe this is essential for Shell’s longevity. This recent deal underlines a commitment to this future, and I think it will lead to gains in the Shell share price in the long term.

Further factors to consider

The firm’s third-quarter trading update was actually fairly positive, considering the challenging environment. Indeed, profits of $489m represented a significant improvement in comparison to the $18.1bn loss in the second quarter. Gearing had also fallen by over 1% over the period, due to net debt falling. With the fourth-quarter update due at the start of February, signs of further improvements may therefore be met by gains in the Shell share price.

Nevertheless, there are also negative factors to consider. For example, although the price of crude oil has been rising, lockdowns around the world may lead to falling demand, and tougher weeks to come. Joe Biden’s presidency may also lead to greater taxes, regulations, and restrictions on oil stocks.

Would I buy (more) Royal Dutch Shell shares?

Since news of the Covid-19 vaccine, the Shell share price has seen very large gains. This has reflected increased optimism within the oil market. But it’s still a long way away from its pre-Covid price. I already own Shell in my portfolio, and I’m tempted to add more. Although the long-term future of many oil stocks is in doubt, I believe Shell has shown sufficient commitment to renewable energy. This has included the sale of many of its assets, in order to invest further into renewable energy sources. The opportunity for further dividend growth in the next trading update may also boost investor sentiment. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stuart Blair owns shares of Royal Dutch Shell. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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