TotalEnergies (TTE) stock has done well in the past few years, helped by the strong performance of crude oil prices. It rose to a high of €68.31 in April, 342% above the lowest point in 2020.
Total to move into copper trading
TotalEnergies stock rose slightly after the Financial Times reported that it was considering diversifying its business into the copper market.
The paper quoted Rahim Azuoni, a company’s executive who said that it was considering the case for copper. He noted that copper had become one of the most important commodities in the market today because of the ongoing energy transition.
Still, TotalEnergies is still studying the industry and has not decided whether it will invest in it. Such a move would help it to complement its vast trading business where the company handles with gas, power, oil, and new fuels.
Most analysts believe that copper has a significant potential because of its use in the utilities industry. Besides, data shows that the copper market is going through a shortage, which could drive prices upwards in the long term.
A recent report cited by The Week estimated that, by 2030, global copper mines will meet just 80% of the total demand. These estimates explain why the price of copper has jumped by over 70% in the last five years.
It is unclear how profitable this division will be for TotalEnergies. Besides, it will need to compete with some of the top copper traders like Glencore, Trafigura, Vitol, and Mitsui.
Crude oil price has bounced back
TotalEnergies stock price has done well because of the recent performance of crude oil. Brent, the global benchmark, has risen in the past seven consecutive days, moving to the highest point since August 29. It has jumped by over 14% from its lowest point this year.
US crude, popularly known as the West Texas Intermediate (WTI) has also risen in the last six straight days, and is hovering at its highest point since August 30th.
Natural gas also bounced back, reaching a high of $3.15, its highest point since June 12, and 63% from its lowest point in August. As we wrote recently, there are rising odds that gas will have a bullish breakout after it formed an inverse head and shoulders pattern.
Oil and natural gas prices are soaring because of the recently announced Chinese stimulus and the potential for disruptions in the Middle East.
Israel is considering bombing Iran’s oil infrastructure, a move that will affect over 1 million barrels per day. Some analysts believe that this disruption will likely push prices to over $100 a barrel soon.
On the other hand, Libya’s oil supply is about to be restored, a move that will help to offset Iran’s shortage.
TotalEnergies earnings ahead
The next important catalyst for the TotalEnergies share price will be its quarterly financial results scheduled for 31st October.
The most recent results showed that Total’s net income dropped by 34% in the second quarter to $3.4 billion. Its half-year net income fell by 1% to $9.5 billion while its cash flow from operations rose to $9 billion.
The results came at a time when the company is implementing what it calls a balanced transition strategy. Unlike companies like ExxonMobil and Chevron, Total has embarked on a strategy to become net zero in the next few years.
Analysts caution that the transition process could make it a less profitable company than its American peers that are focusing on carbon capture. This explains why Total has been relatively undervalued compared to American companies. It has a forward P/E ratio of 7.7 while Exon and Chevron have 12 and 11, respectively.
The upcoming Shell earnings are expected to be relatively weak because of the relatively weak oil prices during the quarter. In a statement, Shell said that its margins on refining crude will drop by 29% to $5.50 a barrel. This estimate came a week after ExxonMobil also lowered its forward guidance.
On the positive side, TotalEnergies has pledged to continuing paying hefty dividends to shareholders, a trend that could continue if oil and gas prices rally holds.
TotalEnergies stock price analysis
The daily chart shows that the TTE share price bottomed at €57.25 in August, and has bounced back to €62.50. It has bounced back above the 50-day and 200-day Exponential Moving Averages (EMA).
The MACD indicator has pointed upwards, and moved above the neutral point. Also, the Relative Strength Index (RSI) has crossed the neutral point of 50 and pointed upwards.
Therefore, the stock will likely continue rising as bulls target the next point at $65, its highest point on July 5.
The risk, however, is where the ongoing crude oil recovery is short-lived. If this happens, the stock may drop and retest the support level at $57.
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