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Home / Blog / blog / Trader’s Corner – Boom or Bust for Power Shares? 20-9-2019

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Trader’s Corner – Boom or Bust for Power Shares? 20-9-2019

Shareholders in BP and Shell have struck gold as well as oil, as prices saw their sharpest rise since the first Gulf War, after a drone attack on Abquiq Saudi Arabia processing centre. The attack, which was claimed by Yemen-based Houdi rebels led to a spike in global energy prices and widespread fears for the impact on the worldwide economy.

On Wednesday both Shell and BP saw share prices jump between 3% and 5% as a result, although both have slumped slightly since. Shell now stands at 2335p at the time of writing and BP has levelled out marginally at 515.60p. So, what will be the long-term effect of the Saudi attack for these two stocks, and should investors be tempted to buy now?

As both companies have operations in Saudi, there are some fears that they could be subject to similar attacks, which would have a devastating effect. In the longer-term though, the attack has disrupted the oil supply chain, shutting down about half of Saudi Arabia’s oil production, and this, coupled with concerns that hostilities between President Trump and Iran will heighten, means oil prices may continue to soar which would be a boon for BP and Shell.

Sirius Minerals has also hit the headlines, as it’s shares lost 50% midweek after it announced the cancellation of its bond sale, which means its prolific North Yorkshire mine development is unlikely to go-ahead. At the time of writing, Sirius Minerals share prices stood at 438p, having already lost two thirds of its value in the past year even before Wednesday’s crash.

Sirius had been hoping to raise $500 million in bonds, but now this has been shelved, it will also be unable to unlock a $2.5 bn revolving credit facility from Morgan Chase. Sirius had already reported an operating loss of $14.7m in the half-year to June 30, larger than the $10.8m loss a year earlier. Analysts are painting a bleak picture on this one – many feel Sirius Minerals will go out of business altogether. Some still hold out hopes that the miner will salvage the project though, saying the company has a few alternative finance options.

It has been better news for IAG – which owns British Airways. It has become the highflier of the FTSE 100 after pilots called off their planned strike on September 27. At the time of writing, IAG shares were 459.6p, enough to top the index leader board on Wednesday. The budget airlines all hit turbulence, however, in the wake of the Saudi drone attack, probably due to fears about rising oil prices. Investors who are considering whether Ryanair would be a good buy, after the dip in prices, might want to consider the discontent around the Chief Executive’s remuneration. Barely half of shareholders voted for a package which would see O’Leary receive 10mln shares if certain targets are met. This, along with growing discontent among the no-frills airline’s striking pilots, has seen prices fall  EUR 10.30 earlier this week, with no safe landing on the horizon just yet.

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.


Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.

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