Last month, Shell (LSE:SHEL) was one of the worst performing FTSE 100 stocks. The Shell share price fell by 9.55%, pushing it down to 2,419p. Given that the 52-week lows aren’t that far away at 2,345p, value investors will likely be starting to get very interested.

Here’s why the stock fell so heavily during the month.

A slippery slope

One of the large impacts was the fall in the oil price. The West Texas Intermediate crude oil benchmark price fell by 10.2% during September. This was due to factors including oversupply and weak consumption by China.

It’s not a surprise to me that the fall in the price of oil almost perfectly matches the fall in Shell stock. Shell is one of the world’s largest oil and gas superpowers. Given it looks after all stages of the process, from exploration through to marketing the refined product, the price of oil really matters. If oil surges to $100 per barrel, revenue for Shell will jump because the company can sell its product at a higher price. If oil falls to $50, Shell doesn’t have the power to hold prices at $100 as clients will go elsewhere. Therefore, the company has to sell at the market rate, making it very sensitive to changes in the market level.

I remember back in 2022 when the oil price was rallying. In the quarters that followed, Shell reported record financial results. So it’s true that this can work both ways. During the good times, owning Shell stock can help me outperform the market. Yet during a period when oil prices fall, it acts as a big drag on the stock.

Looking ahead

Another factor in Shell’s poor month was the disappointing outlook for the oil sector. Both OPEC and the International Energy Agency (IEA) have cut their forecasts for demand for the coming year. Therefore, I don’t expect many investors were that keen to buy the stock on September’s dip, given the rather gloomy outlook.

After all, it takes some time for the lower oil price to filter through to the quarterly financial results. So we could have to wait for a while to see the full extent of the hit that Shell has taken from this move, which could weaken the share price when released.

Not fretting

For long-term investors, the good news is that September didn’t reveal any company-specific negative factors. The whole sector is being impacted by the oil price. Yet as a business, Shell is managing operations as best as possible.

The latest results from August showed adjusted earnings at $6.3bn for the quarter. The firm is still highly profitable. It’s in a strong position to weather any storms that appear to be arriving. Investors will also take confidence from the fact that Shell has a strong track record. Let’s also not forget that it has survived previous oil-related problems in the past.

So although I won’t be investing right now, the September’s share price fall appears to have been driven more by external factors rather than anything internal at Shell.