Oil: Shell writes off up to $5 billion after Russia exit

Yahoo Finance Live’s Julie Hyman and Brian Sozzi discuss Russian oil and how Shell’s exit from Russia will affect its balance sheet.

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JULIE HYMAN: We are going to move on to thing number two here this morning. And that has to do with Russian oil and some commentary we are getting from Shell on how its exit from Russia is going to have an effect on its balance sheet. The company says it's writing off between $4 and $5 billion in assets after divesting from Russia. Just to put this in perspective, BP, for example, has said that it's going to have to take a writedown of up to $25 billion. The company says-- Shell, that is-- it's no longer buying Russian oil. It's shutting down all of its operations in Russia.

At the same time, the company warned of $7 billion of cash outflow from operations because of, quote, "unprecedented volatility" in commodity prices prevailing up till the end of the quarter. And indeed, if you look at oil volatility, there's actually a VIX for oil. Shouldn't surprise you, but we have, indeed, seen an uptick. There, you have it. We have seen an uptick during the quarter. It's come down a little bit, just as the VIX for stocks has come down a little bit, but still, definitely having an effect there. And all of this coming from Shell as Ukraine is asking NATO for more weapons to aid in its fight against Russia.

I should also mention, Brian Sozzi, as we are hearing from Shell, as we heard a little bit from BP, as we are going to hear from the US oil companies as well who testified on Capitol Hill yesterday, it's going to be interesting to see what kind of commentary we get. At the same time, I mean, these oil companies are going to be making a lot of money coming out of the first quarter because, yeah, oil volatility was up, but so are prices. So it should be interesting how they sort of try and manage the commentary around Russia at the same time that they are presumably going to make a lot of money.

BRIAN SOZZI: Oh, Julie, it's going to be a great year of compensation for the top oil executives, no doubt about that. Annual salary, some stock options, some bonuses at year end, they're going to be raking in the dough, as if they need it anymore. I will note this, not to be the bearer of additional bad news-- looking at a call from the folks at JPMorgan, they're saying that commodities prices could surge by as much as 40%.

Julie, they are making the case that investors remain underweight most commodity classes, despite the rise in a lot of these prices. What does underweight mean? Essentially, investors globally do not own enough of commodities in portfolios to account for the inflationary prices we are seeing out there. So JP Morgan looking for a big rise across the board. Oil, grains, you name it, they're calling for it.

JULIE HYMAN: That is really interesting stuff. It's sort of surprising, isn't it, that people are underweight commodities after this big surge that we have seen--

BRIAN SOZZI: [INAUDIBLE]

JULIE HYMAN: --if they haven't already gotten in, but, you know. And I guess, by extension, that could potentially mean even bigger profits for some of these global oil majors.