Berenberg upgrades Shell to 'buy'

Berenberg said that while the environment remains very challenging in the near term, Shell has adapted to a low price environment, leaving an increasingly attractive risk/reward skew for the stock.

It noted the company’s "solid" set of third-quarter results last month, with cash generation up substantially sequentially and the fact that it generated $9bn of operating cash flow in the quarter, pushing net debt down by $4.4bn.

"The quarterly dividend was increased by 4% and Shell laid out the roadmap to material buybacks, likely from 2022, in our price scenario," it said.

"Less than 18 months ago, Shell pledged to return $25bn per year to shareholders in a $60/bbl environment; this would be a 22% return based on today’s share price."

Berenberg said the key catalyst remains a recovery in oil demand driving higher oil prices and refining margins.