Shell has reported a significant drop in profit margins for the third quarter within its oil refining operations, citing a decrease in global demand.
The oil titan indicated that its refining margins dropped to $5.5 (£4.19) per barrel by September 30, a substantial fall from the $7.7 (£5.87) seen in the previous quarter. Widely felt across the sector, including at businesses like Shell's, is a slump in international appetite affecting both consumer and industrial markets.
Factors such as the rise of electric vehicles and economic downturns in key nations, notably , are believed to have contributed to this decline—a sharp contrast to recent times where refiners saw large profits boosted by supply shortages, which were partly due to ’s invasion of .
Additionally, Shell predicted a less fruitful outcome from "trading and optimisation" activities in its chemicals and products division relative to the second quarter. On a brighter note, Shell revised its expected liquefied natural gas (LNG) output upwards, estimating figures between 7.3 million and 7.7 million metric tonnes.
It also forecast that its third-quarter earnings from integrated gas would be on par with the second quarter's $2.675bn (£2.04bn). Furthermore, the company increased its projected oil and gas production range to between 1.74 million and 1.84 million barrels of oil equivalent per day (boe/d), up from the previously anticipated 1.58 million to 1.78 million boe/d.
This hike in production volume coincides with a period witnessing a considerable dip in oil prices, as Brent crude futures experienced a drop greater than one-sixth over the quarter. The figures don't include the recent price hikes, which have been fuelled by renewed military conflicts between and Iran.
Shell's shares have seen a roughly 7% increase since the start of last week due to concerns over a temporary oil supply shortage, following Iran's missile attack on Israel in retaliation for their bombardment of Lebanon.
Besides being one of the top 10 global oil exporters, Iran also shares a border with the Strait of Hormuz, a key area through which Saudi Arabia, the United Arab Emirates, and Kuwait export oil and gas. On Friday, US energy behemoth ExxonMobil announced that lower oil prices and refining margins in the most recent quarter will likely impact its profits for the period.
