Shell Q2 preview: Where next for the Shell share price?

When will Shell release Q2 earnings?

Shell will release second quarter earnings on the morning of Thursday July 28.

Shell Q2 earnings consensus

Adjusted earnings – Shell’s headline profit measure – is forecast to more than double to $11.2 billion from $5.5 billion the year before in the second quarter. Adjusted EPS is expected to jump to $1.56 from $0.71.

Shell Q2 earnings preview

The oil and gas industry is expected to deliver the strongest performance out of any sector this earnings season. While most companies are having a tough time navigating through the wave of economic challenges at present, those churning out energy are reaping huge rewards. Prices of oil and gas remain elevated and tight capacity is proving fruitful for refining margins.

We have seen oil prices soften since hitting a high of $135 a barrel back in March, but Brent remains above the $106 mark today. This time last year, Brent traded below $75. Natural gas, which is a particular area of focus for Shell, is once again testing the highs seen last month and prices remain over twice as high as this time last year.

And those prices are set to remain high, according to forecasts. The International Energy Agency said just today that it still expects Brent to average some $104 per barrel this year and $93.75 in 2023, although both have been trimmed.

Meanwhile, with reports that capacity for refineries is being stretched, margins have exploded to unprecedented levels as customers battle it out for the limited amount available. Shell’s refining margin is forecast to come in over $25 per barrel in the second quarter compared to just $4.17 a year earlier.

Shell’s trading arm is also expected to remain strong after delivering exceptional profits in the first quarter, when prices were at their most volatile amid the eruption of war in Ukraine. Shell, which is the largest trader of LNG in the world, has already said this arm of the business will deliver strong earnings, although not as great as what we saw in the first three months of 2022.

Shell completed the $8.5 billion share buyback programme for the first half of 2022 in early July and investors will be eager to hear about the next stage of returns. Shell is currently returning over 30% of its cashflow from operations through both buybacks and dividends. Operating cashflow, which it refers to as CFFO, is forecast to come in around $37.3 billion in the second half of 2022. Analysts at Bloomberg Intelligence have forecast it will unveil a buyback plan worth at least $6 billion in the second half based on the company’s guidance.

Where next for the Shell share price?

Shell shares have lost steam since peaking in June, tracking commodity prices lower and falling over 13% to trade at 2,109.5p today.

The stock has pushed higher in recent days and is now trading at a three-week high. The 100-day moving average at 2,149p is the next key barrier to break above before the 50-day moving average at 2,191p can come into view. From there, it can look to edge toward 2,217p and surpass the July-high before targeting a much bigger upside target of 2,409p. Notably, the 24 brokers that cover Shell believe there is huge upside potential to the stock with an average target price of 2,843p, levels last seen way back in mid-2018.

A new floor at 2,002p has emerged in recent weeks, but the 200-day moving average at 1,958p should be considered a firmer floor considering the stock has remained above here over the past two years and provided support when shares recently hit this level earlier this month. The RSI is trending higher but remains in neutral territory, but the average-volume-at-time over the past five days has more than halved from the 30-day and 100-day averages to suggest the stock is lacking momentum.

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