Shell says profits will be hit by weaker gas trading

Shell warned that third-quarter profits would be dented after it weathered a sharp rise in refining costs and weaker earnings from natural gas trading.

The firm has been raking in record profits this year but said that earning would fall in the third quarter, as indicative refining margins dropped to $15 a barrel compared with $28 a barrel in the previous three months.

Shell’s third quarter liquefied natural gas (LNG) and gas trading results are also expected to be “significantly lower”, the firm said in a statement, due to lower seasonal demand as well as “substantial differences between paper and physical realisation in a volatile and dislocated market.”

This comes amid expectations of recessions across develop economies, driving down consumer interest in oil and gas amid reduced demand for air travel and reduced economic activity.

The firm said that cash flow from operations (CFFO) was hampered by operational expenditure of around $2.5bn.

It warned “prevailing volatility” could lead to further outflows in cash from the combined effect of “price impacts on inventory, changes in inventory volumes (including gas storage), margining effects on derivatives and movements in accounts payable and receivables balances.”

Meanwhile, Shell believed that liquefied natural gas volumes are expected to be between 6.9m and 7.5m tonnes.

“Trading and optimisation results for Integrated Gas are expected to be significantly lower compared to the second quarter 2022 as a result of seasonality and substantial differences between paper and physical realisation in a volatile and dislocated market,” the firm said.

Integrated gas was expected to be between 890 and 940 thousand barrels of oil equivalent per day, while tax paid was expected to come in between $3.4bn and $3.8bn in the third quarter.