In a session that saw the vast majority of London-listed stocks fall sharply, Shell and BP stood out as two of the very few meaningful positive performers in the FTSE 100 on Monday, each gaining approximately 3% as the surge in oil prices boosted investor expectations for their near-term earnings. The gains provided a small but meaningful cushion against the broader market decline, illustrating the unusual composition of London’s benchmark index.
The logic behind the gains in BP and Shell is straightforward. Both companies are major producers of oil and natural gas, and higher commodity prices translate directly into higher revenues. With Brent crude rising as much as 13% in a single session to hit a 14-month high of $82 a barrel, the uplift to oil company earnings in the near term is substantial. Even at the slightly lower settled price of around $77 a barrel, the improvement in the revenue outlook for both companies is meaningful.
Both BP and Shell have also invested significantly in LNG operations in recent years, positioning themselves as major players in the global gas trade. With LNG prices surging in the wake of the Qatar shutdown, these investments are also generating significant additional value. The combination of higher oil prices and higher LNG prices creates a broadly favourable commercial environment for integrated energy companies like BP and Shell, whatever the broader geopolitical and economic concerns.
The 3% gains in BP and Shell are modest relative to the scale of the oil price move, reflecting both investor caution about the durability of the price rise and concerns about the broader economic environment. If high energy prices persist long enough to materially slow economic growth, the reduced demand for oil and gas could eventually offset the benefit of higher per-unit prices. Experienced oil company investors are therefore celebrating with some restraint, recognising that the current environment, while commercially favourable, is not without its complexities.
For the FTSE 100 index as a whole, the gains in BP and Shell were welcome but insufficient to prevent a meaningful overall decline. The index fell 1.2% to 10,780 points — a smaller decline than most continental European peers, but still a significant negative session. The relative resilience of the FTSE 100 compared to European alternatives is a recurring feature of energy crisis episodes, given the index’s unusually high weighting in energy sector companies.
