Shell anticipates its refineries will generate unprecedented profit margins during the third quarter, forecasting $42 per barrel compared to $24 in the preceding quarter. This projection substantially exceeds the prior record of approximately $28 per barrel established during the initial phases of the Russia-Ukraine conflict.
The elevated margins result from a widening gap between refined fuel prices and crude oil costs. While crude prices have moderated to roughly $100 per barrel following a partial recovery of Gulf oil exports, war-related damage to Middle Eastern and Russian refineries has sustained upward pressure on diesel and other fuel prices. This disparity creates favorable conditions for refinery operators, particularly those in the United States and Europe.
Shell’s financial performance reflects these market dynamics. The company reported second-quarter profits near $10 billion, more than double the prior-year period, marking its second-highest quarterly earnings on record. The company’s share price reached a historic high of £36.23 at the month’s end, supported by record diesel prices and European gas prices that doubled year-over-year during the summer months.
Global crude benchmarks showed mixed movement during the third quarter. Brent crude averaged $85.60 per barrel, declining from $97.05 in the second quarter but significantly higher than $68.14 from the same period the previous year. The diesel premium over the global oil benchmark exceeded $100 per barrel for the first time, signaling record refining profits.
Shell’s gas operations faced challenges from the Middle East crisis, which damaged a critical processing facility and reduced production by one-third from pre-crisis levels of 900,000 barrels of oil equivalent daily. However, the completion of the ARC Resources acquisition in early September is expected to restore production to 740,000 to 780,000 barrels of oil equivalent per day, substantially above prior forecasts.
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