As someone who holds BP shares, I haven’t paid close attention to the Shell (LSE: SHEL) share price lately. Well, I checked this morning, and it confirmed my suspicions that I backed the wrong FTSE 100 oil major. At least so far.
Shares in Shell are up almost 12% over the past year and 192% over five years. BP has managed 8.5% and 113% over the same period. No stock rises in a straight line, and these numbers are slightly misleading. Both have seen plenty of volatility along the way.
Energy prices rocketed after Russia invaded Ukraine in 2022, sending both BP and Shell skywards, only for crude to retreat toward $60 a barrel. BP got bogged down in self-inflicted issues, including a misfiring green transition it later reversed.
Shell has also been hit by falling European gas prices, which slumped after a ceasefire between Iran and Israel reduced supply fears via the Strait of Hormuz. Q2 earnings on 31 July showed a 32% drop in adjusted earnings to $4.26bn, down from $6.29bn a year earlier.
FTSE 100 oil giants
Lately, Brent crude has dipped to multi-month lows amid talk of a potential glut but jumped to $65 a barrel after Donald Trump’s threats of sanctions on Russian oil. BP and Shell shares are up 6% over the last week. Is this just a blip?
Yesterday (23 October), a positive Q3 update lifted Shell as the board signalled “significantly higher” Q3 integrated gas trading revenues. We’ll know more when full Q3 results land on 30 October.
The oil price outlook isn’t encouraging, amid trade wars and tariffs and fears of a US recession. Traders at Standard Chartered were among the few remaining optimists, but they’ve now cut their 2026 and 2027 oil price forecasts by around $15 a barrel – to $63.50 in 2026 and $67 in 2027. Higher supply from OPEC+ and US shale is the main factor.
That’s bad news for the Shell share price, but energy stocks are cyclical, and buying nearer the bottom of the cycle is often wiser than chasing soaring prices.
Dividends and buybacks
Shell looks good value today, with a price-to-earnings ratio of just 10, although the trailing dividend yield of 3.8% disappoints. That’s lower than BP’s 5.6%, and Shell’s recent dividend record is patchy. It froze payouts at 188 cents per share for six years, then slashed them by 65% during the pandemic in 2020. By 2024, the dividend had crept back to 139 cents.
The board has been more generous with share buybacks, spending $3.5bn in Q3 alone. There are rewards to be had here. Most investors will want exposure to energy stocks, especially as artificial intelligence hyperscalers pour money into energy-hungry data centres. The net zero charge brings uncertainty though.
Analyst forecasts
Consensus forecasts produce a one-year share price target of just under 3,070p. That would mark a 7.85% rise from today. Combined with a forward yield of 3.98%, total returns could hit 11.83%. That would turn £10,000 into £11,183. That’s hardly spectacular, and it isn’t guaranteed either.
Investors might well consider buying Shell today, but patience is essential. The rewards could take a few years to appear, though dividends and buybacks will smooth the way. They’re an often overlooked benefit of investing in FTSE 100 stocks.
