Shell's shares slip on up to $4.5 bln writedown

This is mainly related to the Singapore refining and chemicals hub the oil major is looking to sell. IGTV financial analyst, Angeline Ong, explains how this latest news relates to the weaker oil price narrative.

(AI Video Summary)

Shell share price drops 2% on FTSE 100

Shell, one of the biggest companies in the oil industry, has had a difficult year. Its stock on the FTSE 100, a stock exchange in the UK, has dropped by around 2%. Recently, the company announced that it would have to accept losses of around $2.5 billion to $4.5 billion in the fourth quarter of the year. This is because their refining and chemicals hub in Singapore, which includes a refinery and an ethylene plant, is not making as much money as they had hoped.

BP shares also fall

Despite these challenges, Shell's stock has actually gone up by more than 10% in 2023. However, another major player in the industry, BP, has not been so fortunate. Its shares have also fallen, but not by as much as Shell, only by three quarters of a percent. The main reason for the struggles of both companies is the low price of oil in the market. Because of this, Shell has already started getting rid of areas of their business that aren't making a profit and cutting costs. For example, in October they announced job cuts in their low carbon division, which focuses on clean energy, and a search for ways to be more efficient.

If oil prices stay low and the market remains volatile, it is likely that both Shell and BP will have to take more steps to prevent further losses. This could mean accepting more losses and finding more ways to cut costs. Ultimately, how well the companies do in the future will depend a lot on how oil prices change and how well they are able to adapt to the changing market.