Shell’s refining margins have plummeted as demand weakens globally, according to The Independent. The oil giant reported a significant drop in quarterly profit margins in its oil refining business due to a slowdown in demand worldwide. Shell disclosed that its indicative refining margins decreased to $5.5 (£4.19) per barrel in the quarter ending September 30, compared to $7.7 (£5.87) per barrel in the previous quarter.
The decline in demand has affected oil refining businesses like Shell’s across consumer and industrial sectors. Factors contributing to this slowdown include the increasing popularity of electric vehicles and economic slowdowns in major economies such as China. This contrasts with previous years when refiners benefitted from high profits due to supply shortages, partly driven by global geopolitical events like Russia’s invasion of Ukraine.
Shell anticipates lower results for its chemicals and products business in terms of trading and optimization compared to the previous quarter. However, the company raised its guidance for liquefied natural gas production to 7.3 million to 7.7 million metric tonnes. In addition, Shell’s third-quarter integrated gas profits are expected to be on par with the second quarter at $2.675 billion (£2.04 billion).
Moreover, Shell has increased its oil and gas production outlook to 1.74 million to 1.84 million barrels of oil equivalent per day (boe/d), up from the previous range of 1.58 million to 1.78 million boe/d. This rise in production comes at a time when oil prices have significantly dropped, with Brent crude futures prices decreasing by more than one-sixth during the third quarter.
It is worth noting that the current figures do not reflect recent price increases driven by renewed military conflicts between Israel and Iran. Shell’s shares have seen a 7% increase since the beginning of last week following concerns of a temporary oil supply shortage triggered by Iran’s missile attacks on Israel in response to the latter’s actions in Lebanon. Iran, in addition to being a major global oil exporter, shares borders with the Strait of Hormuz, a crucial area for oil and gas exports from countries like Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait.
US energy giant ExxonMobil also warned that lower oil prices and refining margins in the recent quarter could impact its profits for the period. This development highlights the ongoing challenges faced by oil companies amid fluctuations in global demand and geopolitical tensions affecting oil prices.