Can Shell shares push higher? Or has this bull run come to an end?

Shell (LSE:SHEL) shares are among the best-performing UK-listed stocks over the past year. The hydrocarbons giant is up 49.5% over 12 months as profits soared.

But will this stock go any higher? Personally, I don’t think it will this year. Let’s take a closer look at its recent performance and outlook.

Recent performance

In late July, Shell said that profits had doubled in the last quarter, as energy prices surged. Adjusted earnings came in at $11.5bn for the three months to the end of June. Meanwhile, adjusted EBITDA reached $23.1bn in Q2 versus $19bn in Q1.

The firm said it was working hard to bring more supply online and highlighted the Jackdaw project in the North Sea, which will have peak production of 40,000 bpd. Meanwhile, Shell said that refining profit margins tripled in the quarter to $28 per barrel. 

Shell’s EBITDA for the 12 months ending June 30 was $76.3bn, a 74.5% increase year on year.

What’s next?

Shell’s recent performance is largely due to soaring energy prices. Hydrocarbons firms undertook efficiency drives during the pandemic, and that helped margins. But the real difference has been the oil price, which reached $120 earlier this year.

However, things are starting to change. After months of analysts arguing whether oil would go higher or lower, it looks like we finally know the answer — and I was right. Brent Crude is currently trading for $94 a barrel and there are suggestions that it might fall further.

Last week, OPEC suggested that there might be a surplus of oil on the global market this year. This generally reflects falling economic output around the world and growing recession fears.

Concerns were heightened on Monday as China reported data for July that came in well below expectations. In an immediate response, the central bank in China — the world’s largest crude oil importer — cut interest rates in an attempt to accelerate economic growth. However, some commentators have suggested the moves from the central bank aren’t enough.

I can see oil going as low as $60 this year, and this wouldn’t be good for Shell and the share price. Profits would still be sizeable, but considerably less than what we’re seeing right now.

There’s also the matter of the UK windfall tax, although I’m still not perfectly sure what this will mean for Shell as there appears to be investment-related loopholes.

I’m holding off

Because of the above, I’m not buying Shell shares right now. However, in the long run, I think the hydrocarbons giant will perform rather well.

It’s clear to me that we’re entering a new era, defined by higher commodity prices and increased competition for resources. Despite the move towards greener energy, I see oil averaging at a higher price over the next decade than the last.

And this is why I’m bullish on Shell in the long run. As such, I’m keeping a close eye on this stock and may buy at a lower entry point later this year.

This post was originally published on Motley Fool