Why did Shell’s share price fall by almost 10% in September

Last month, A shell (LSE:SHEL) was one of the worst performers FTSE 100 shares. Shell’s share price fell 9.55%, to 2,419p. Given that the 52-week low is not that far off at 2,345p, value investors will likely start to take more interest.

Here’s why the stock fell so much during the month.

It’s a slippery slope

One of the biggest impacts was the drop in oil prices. The West Texas Intermediate crude oil benchmark fell 10.2% in September. This is due to factors including oversupply and weak consumption in China.

It’s no surprise to me that the drop in oil prices has almost paralleled the drop in Shell stock. Shell is one of the world’s largest oil and gas giants. As it covers all stages of the process, from exploration to marketing of the refined product, the price of oil is really important. If oil rises to $100 per barrel, Shell’s revenue will jump because the company can sell its product at a higher price. If oil drops to $50, Shell has no power to hold prices to $100 as customers will go elsewhere. Therefore, the company must sell at the market price, which makes it more sensitive to changes in the market level.

I remember back in 2022 when the price of oil was going up. In the following sections, Shell reported the recorded financial results. So it’s true that this can work both ways. In good times, owning Shell stock can help me succeed in the market. But during a period when oil prices are falling, it acts as a big drag on the stock.

Looking ahead

Another factor that contributed to Shell’s poor month was the oil sector’s disappointment. Both OPEC and the International Energy Agency (IEA) cut their forecasts for demand next year. Therefore, I do not expect that many investors were willing to buy the stock in September, given the negative outlook.

After all, it takes time for lower oil prices to filter through to quarterly financial results. So we may have to wait a while to see the full scope of the song Shell has taken on this, which could weaken the share price upon release.

Not anger

For long-term investors, the good news is that September did not reveal any negative company-specific factors. Every sector is affected by the price of oil. However as a business, Shell manages operations at its best.

The latest results from August showed adjusted profits at $6.3bn for the quarter. The firm is still very profitable. It is in a strong position to face any storms that seem to come. Investors will also rely on the fact that Shell has a strong track record. Let’s also not forget that it has survived previous oil-related crises in the past.

So while I wouldn’t invest right now, September’s share price decline appears to have been driven more by external factors than anything internal to Shell.