Shell sees refining margins hitting record high in third quarter

Shell anticipates its third-quarter refining margins to reach an unprecedented US$42 per barrel, a significant rise from US$24 per barrel in the previous quarter, according to the oil giant's report on Wednesday. This surge in margins is attributed to the sharp increase in global benchmark Brent LCOc1 crude prices following the US and Israel's military actions against Iran in late February, which led to Iran effectively closing the Strait of Hormuz and attacking nearby Gulf nations.

Energy price increases have consequently benefited major oil companies, with Shell set to benefit from a multibillion-dollar profit boost. Shell has revised its third-quarter integrated gas production forecast upwards, projecting a production range of 740,000 to 780,000 barrels of oil equivalent per day, up from the previous estimate of 570,000 to 630,000 boed.

The company's actual production for the second quarter was 631,000 boed, compared to more than 900,000 boed in the preceding period prior to the Iran conflict. Liquefied natural gas production is projected to range between 7.2 million and 7.6 million metric tons for the third quarter, slightly adjusted from the earlier forecast of 7.1 million to 7.7 million tons, and the second quarter's output of 7.7 million tons.

This production outlook takes into account Shell's $16.4 billion acquisition of Canadian energy company ARC Resources, completed on September 2. Shell has also reduced its third-quarter upstream production forecast to between 1.74 million and 1.84 million boed, a downward adjustment from the earlier range of 1.68 million to 1.88 million boed.

Notably, refinery utilisation at Shell's chemicals and products unit, including its extensive oil trading business, is expected to decline in the third quarter compared to the second quarter due to reduced Rhine water levels impacting operations at the Rheinland refinery.