OPEC raises supply risk issue: 5 FTSE stocks you may look at

Highlights 

• The International Energy Agency (IEA) has warned that failure to increase supply by OPEC countries may further increase energy prices and volatility.
• In December, the OECD industry oil inventory jumped by 60 mb to 255 mb, which is below the five-year average and its lowest in seven years.

The chronic oil supply issues among the Organisation of the Petroleum Exporting Countries (OPEC) may further increase the energy prices and volatility, the International Energy Agency (IEA) has warned.

The agency said in its monthly market report that failed attempts to increase supply by OPEC countries and their allies have surged oil prices to their highest mark since 2014.

The Paris-headquartered agency further added that there are indications that the supply is falling, adding to the tightness in an already stretched market.

The Saudi Arabia-led oil producing group has been increasing their supply gradually with small hikes to keep up with increasing oil demand and decreasing stockpiles from the height of the pandemic.

For the first time in over seven years, Benchmark crude prices increased by 15% to over £66 per barrel in January, following which global oil stocks stood at lows and decreasing spare capacity have left the market with only a small cushion.

Various oil consuming countries have been urging OPEC countries to increase the oil production seeing the strong demand. But some OPEC member countries are unable to do so because of ageing oil infrastructure following the years of underinvestment.  

In December 2021, OECD industry oil inventory jumped by 60 mb to 255 mb, which is below the five-year average and its lowest in seven years. Despite the release of over 50 mb of oil from government reserves in past 12 months industry stocks of oil have fallen by 50 mb.

The agency added that the two oil producers with most space production capacity, the United Arab Emirates (UAE) and the Saudi Arabia can help in normalising the oil market if they increase their production.

Let us look at the five FTSE energy companies.

1. Shell Plc (LON:SHEL)

Shell Plc is a multinational energy and petrochemical company with 13 refineries in over 70 countries. The company is engaged in exploration, production, refining, and marketing of oil and natural gas and the manufacturing and marketing of chemicals. On 21 January 2022, the Royal Dutch Shell Plc change its name to Shell Plc by assimilation of the company’s A (code RDSA) and B (code RDSB) shares into a single line of ordinary shares.

The company’s Q4 2021 Income attributable to its shareholders increased by 2,662% to US$ 11,461 million, compared to a loss of US$ 4,014 million in Q4 2020 and its income rose by 193 per cent to US$ 20,101 million in FY2021, as compared to a loss of US$ 21,680 million in FY2020.

The FTSE 100 constituent has given a return of 50.37% to its shareholders in the last one year and its year-to-date return stands at 25.91% as of 11 February 2022. Its shares closed trading at GBX 2,031.50, down by 0.37%, on 11 February 2022, with a market capitalization of £155,761.24 million.

Also Read: Crude oil hits fresh seven-year high amid Russia-Ukraine tension

2. Harbour Energy Plc (LON: HBR)

Harbour Energy Plc is an independent oil and gas company with operations in the UK, Indonesia, Brazil, Mauritania, Norway, Vietnam, Falkland Islands, and Mexico.

The FTSE 250 constituent has given a return of -9.51% to its shareholders in the last one year and its year-to-date return stands at 4.80% as of 11 February 2022. Its shares closed trading at GBX 371, up by 0.87%, on 11 February 2022, with a market capitalization of £3,404.11 million

3. SSE Plc (LON: SSE)

SSE Plc is one of the leading energy companies in UK that develops, owns and operates low carbon infrastructure to support the zero-carbon transition. Recently, the company has upgraded its expectations for full-year 2021/22 adjusted earnings per share to at least 90 pence from at least 83 pence, which shows the strength and stability provided by its balanced mix of regulated and market facing businesses.

The FTSE 100 constituent has given a return of 7.28% to its shareholders in the last one year and its year-to-date return stands at -6.46% as of 11 February 2022. Its shares closed trading at GBX 1,526.00, down by 1.36%, with a market capitalization of £16,488.84 million on 11 February 2022.

Also Read: UK economy recovers from pandemic blues, Omicron impacts December growth

4. Pharos Energy Plc (LON: PHAR)

Pharos Energy Plc is an independent oil and gas exploration and production company with interests in Israel, Egypt, and Vietnam.

Pharos Energy has given a return of 27.38% to its shareholders in the last one year and its year-to-date return stands at -2.02% as of 11 February 2022. Its shares closed trading at GBX 26.00, down by 1.89%, with a market capitalization of £117.28 million on 11 February 2022.

5. Vivo Energy Plc (LON: VVO)

Vivo Energy Plc is a petroleum company with operations in 23 countries across Africa and a network of over 2,000 service stations.

The FTSE 250 constituent has given a return of 59.85% to its shareholders in the last one year and its year-to-date return stands at 0.22% as of 11 February 2022. Its shares closed trading at GBX 132.20 with a market capitalization of £1,679.96 million on 11 February 2022.