KEY POINTS
- Shell expects weaker Q1 gas production and a temporary liquidity hit due to Middle East disruptions.
- Market volatility pushed working capital into a negative $10–$15 billion range, though recovery is expected.
- Strong oil trading performance may help offset losses from disrupted upstream operations.
Shell plc has projected a decline in its first-quarter gas production alongside a significant short-term strain on liquidity, largely driven by disruptions linked to the ongoing tensions involving Iran in the Middle East.
In a trading update released ahead of its May 7 earnings report, the energy giant revealed that extreme volatility in global oil and gas markets led to major fluctuations in inventory values. This, in turn, pushed its working capital to a negative range of between $10 billion and $15 billion during the quarter. However, the company expressed optimism that these pressures could ease over time if commodity prices stabilise.
Shell also revised its integrated gas production guidance downward to between 880,000 and 920,000 barrels of oil equivalent per day (boe/d), compared to 948,000 boe/d recorded in the previous quarter. The drop is attributed to operational disruptions across parts of the Middle East.
LNG Outlook Expected to Remain Stable
Despite these setbacks, liquefied natural gas (LNG) output is expected to remain largely stable. Additional supply from Canada is anticipated to offset some of the production losses experienced in the region.
The update underscores the broader impact of geopolitical tensions on global energy markets.
During the quarter, Brent crude prices surged to nearly $120 per barrel amid supply disruptions and heightened uncertainty. While these conditions strained upstream operations and balance sheet metrics, they also created favorable conditions for oil trading activities, which are expected to partly support Shell’s overall earnings.
