BP and Shell shares hit pre-pandemic levels as oil climbs

A recent swell in oil prices has driven the valuation of oil and gas giants Shell and BP to levels not seen since before the pandemic.

On Tuesday BP (LSE: BP) was trading at £3.95 a share on the London Stock Exchange, the highest figure for the supermajor since February 2020.

That same day shares in Shell (LSE: RDSA) topped out at £18.72 before dropping off slightly in the subsequent days.

Again it was a level the Anglo Dutch giant had not experienced since February 2020, a month before the UK was plunged into its first Covid-19 lockdown.

Unrest in the Middle East and diminishing concerns about the impact of Omicron drove oil benchmarks to seven year highs this week.

Brent topped $87 a barrel on the ICE Futures Europe exchange, the highest level since October 2014.

Meanwhile West Texas Intermediate (WTI) oil also briefly rose above $85 a barrel for the first time since 2014.

And according to analysis from Rystad, oil could continue to rally in the coming months with $100 a barrel a possibility.

Causes

In the shorter term a drone attack on Abu Dhabi by Yemen’s Houthi rebels earlier this week prompted a dramatic spike in oil prices.

Missile strikes triggered a fire and explosion involving three tanker trucks at Mussafah, near to storage tanks owned by oil giant Adnoc.

Three people died in Monday’s attack, while six more were injured – Adnoc’s chief executive recently visited the wounded in hospital.

© Supplied by Adnoc

Perhaps more crucial though is the changing attitudes to Omicron that could yield more sustained oil demand.

Sustained evidence is emerging that although the Covid-19 variant is more transmissible, it results in fewer hospitalisations and deaths.

As a result countries are beginning to roll back their Omicron restrictions, sparking increasing demand for oil.

There are the actions of OPEC+ to consider too, with reports that only a handful of cartel members have the spare production capacity to feed the market.

Members may opt to increase output over and above the 400,000 barrels a day each month that has been agreed but as yet that is unclear.