KEY POINTS
- Shell expects a fourth-quarter loss in chemicals.
- Oil and gas output forecasts remain unchanged.
- Refining margins are set to improve.
Shell Plc warned that its chemicals and products division is set to post a loss in the fourth quarter, even as the company kept output guidance steady across its oil, gas and liquefied natural gas businesses.
In a trading update on Thursday, the energy major said earnings in the chemicals and products unit would be dragged down by falling margins, a tax adjustment and weaker trading performance. Chemicals margins are expected to slip to about $140 per metric ton, down from $160 in the third quarter, reflecting continued pressure across global petrochemical markets.
Shell said trading results in the division were “significantly lower” than in the previous quarter. Energy companies typically disclose little about their trading operations, arguing that detailed disclosure could undermine their competitive position. The latest update nonetheless underscores the strain facing chemicals producers as demand remains subdued and new capacity weighs on pricing.
Margins pressure chemicals earnings
The chemicals and products business last reported a quarterly loss in the final three months of 2024. Since then, margins have struggled to recover as slowing industrial activity and weaker consumer demand have limited pricing power across major markets.
By contrast, Shell maintained its outlook for upstream production in the fourth quarter. Oil-focused output is expected to remain within earlier guidance of about 1.84 million to 1.94 million barrels of oil equivalent per day. That compares with production of 1.83 million boed in the third quarter, reflecting relatively stable performance across its portfolio.
Integrated gas production is also forecast to stay within previous guidance of 930,000 to 970,000 boed. Shell produced 934,000 boed from its gas business in the third quarter, supported by steady operations and ongoing project ramp-ups.
Output guidance holds steady
The company said it expects to liquefy between 7.5 million tons and 7.9 million tons of LNG during the quarter, according to Reuter. The narrowed range remains within its earlier forecast of 7.4 million to 8 million tons and points to consistent performance in one of Shell’s core profit drivers.
Shell also forecast an improvement in refining margins. The indicative refining margin is expected to rise to $14 a barrel in the fourth quarter, up from $12 in the previous quarter, offering some offset to weakness in chemicals.
