Shell expects significantly higher oil and LNG trading results for the second quarter, as the Iran war drove extreme volatility across energy commodity markets. The windfall came at a cost: lost Qatari volumes squeezed the supermajor’s gas output.
Shell expects to have booked significantly higher oil and LNG trading results in the second quarter as the Iran war drove extreme volatility in energy commodity markets. The UK-based company said its trading and optimization result in the integrated gas division should be significantly higher than in the first quarter, in an update note issued ahead of reporting detailed Q2 figures on July 30.
Trading desks cash in on the conflict
The war between the U.S. and Iran, which broke out in February, drove oil and gas prices higher and caused dislocations across energy markets that Shell’s trading desks were able to exploit. The company expects results in its chemicals and products division and its marketing division to be in line with Q1’26, after it had already posted strong oil trading profits for the first quarter.
Shell does not break out its trading performance, but adjusted earnings in the chemicals and products division, which houses its oil traders, surged to $1.925 billion in the first quarter, swinging from a loss at the end of last year. Conflict kept oil prices high through most of the second quarter, though prices have fallen since the two sides reached a preliminary peace agreement in mid-June.
Lost Qatari volumes squeeze output
The gains did not come cleanly. Integrated gas production will fall significantly quarter-on-quarter, though Shell lifted its estimate to 610,000 to 650,000 barrels of oil-equivalent a day on strong output elsewhere. The unit produced 909,000 BOE a day in the first quarter, with the drop tied to the conflict’s hit to output in Qatar.
In May, Shell said it had lost roughly 10% of its total production due to damaged or shut-down assets in Qatar, where it runs the Pearl gas-to-liquids plant and holds a 30% stake in a QatarEnergy LNG facility. The Pearl site was hit by an Iranian attack in March, damaging one processing train that the company hopes to restart early next year.
What comes next
Shell now expects second-quarter LNG volumes between 7.4 million and 7.8 million metric tons, up from earlier guidance, and sees refining margins rising to around $20 a barrel from $17 in the first quarter. Shares traded 3.2% higher Tuesday morning.
Analysts estimate that trading profits at the European majors run into billions of dollars per quarter during periods of extreme market volatility. All the supermajors are set to report second-quarter results later this month, though Big Oil will be careful not to boast amid U.S. pressure over gasoline prices.
Sources: OilPrice.com, MarketScreener
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