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Market Report: Goldman Sachs joins supporters of Shell

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JAMIE NIMMO: Friday 11 March 2016

Goldman Sachs became the latest bulge-bracket broker to throw its weight behind Royal Dutch Shell shares after the oil giant’s mega-merger with BG.

The US bank added the supermajor to its hallowed Conviction Buy list, suggesting that more disciplined spending will help protect its rich dividend, which makes it a favourite for pensions and long-term savers.

The company is still set to splash out more than $30 billion (£21 billion) this year, joining only Petrochina above that level, but Goldman expects this budget to shrink from 2017.

Concerns around Shell’s ability to keep rewarding shareholders with bumper payouts amid lower oil prices surfaced before its BG takeover and are likely to have caught the eye of the ratings agencies, which have been on high alert during the commodities crisis. The miners have already felt the full force of junk ratings, but oil majors are yet to feel their wrath.

Fifteen brokers have Buy or Strong Buy recommendations on Shell, up from 12 a month ago, according to data from Reuters. The latest upgrade helped Shell’s B shares gush 38p higher to 1679p.

A slight pick-up in the oil price meant oilers played a part in the FTSE 100’s 92.12-point gain to 6128.82, recovering from yesterday’s slump when ECB president Mario Draghi spooked markets by stating that he does not expect further rate cuts.

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