JP Morgan downgrades Shell to 'neutral' on vulnerability to demand risks

Analysts at JP Morgan downgraded their recommendation for shares of Royal Dutch Shell 's B shares from 'overweight' to 'neutral' on the back of the recent "breakdown" in relations among OPEC+ members that had resulted in a crude oil price crash.

Nonetheless, they expected the current episode of depressed oil prices to prove "short-lived".

"An inevitable capex slowdown could expedite our oil supercycle thesis from 2022; but, in the meantime, the EU Oils’ backs are against the wall (again) with prevailing cash breakevens insufficient," they added.

Yet Shell remained the "most vulnerable" to demand risks within its peer group.

Thus, their target price for the oil major's B shares meanwhile was cut from 2,850.0p to 1,750.0p.

JP Morgan however kept its recommendation for BP at 'overweight', although the target price for its stock was also cut, albeit by less, from 600.0p to 475.0p.

The investment bank labelled BP's break-evem "best-in-class", telling clients that equated to "resilience".

Significantly, JP Morgan believed that at a price of $40 a barrel the oil major's under its coverage were capable of defending their dividends through a 12-18 month trough.