Pump Slump

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What's going on?

Shell’s quarterly earnings missed analysts’ expectations on Thursday, but at least one thing isn’t running dry: the oil company upped its dividend.

What does this mean?

Like the rest of 2020, last quarter was hard for oil companies, with ongoing travel restrictions continuing to hammer demand for and the price of the slippery elixir. So it might come as no surprise that Shell posted a worse-than-expected 87% drop in profit compared to the same time the year before.

The oil company’s feeling surprisingly upbeat about the road ahead though: it’s expecting the vaccine to drive an economic recovery by the second half of the year – and with it, oil demand. In fact, Shell reckons things will be completely back to normal by 2022. And in the meantime, it’s doing whatever it can to reassure investors: namely boosting shareholder payouts by 4%.

Why should I care?

For markets: Energy companies are all in the same boat. 

There were some early signs of improvement for energy companies in the third quarter of last year, but they’ve gone out the window since: Exxon, BP, and Chevron have all reported weaker-than-expected results over the past week. And analysts didn’t even set the bar particularly high: they’d forecasted that of all the sectors, energy companies would see the biggest drop in earnings.

The bigger picture: Hasn’t oil gone green yet?

Oil companies aren’t just struggling with the pandemic: they’re trying to keep up with the transition away from fossil fuels too. And thanks to an eco-conscious new US president, that transition might be about to happen faster than anyone expected: he’s already rejoined the Paris climate agreement, ripped up the Keystone Pipeline permit, and suspended new oil and gas leases on public land. That might be why shares of oil producers have underperformed the global stock market by 6% since his inauguration (tweet this).

Originally posted as part of the Finimize daily email.

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