Shell reported significant profit improvements in its refining operations, with the company forecasting margins of $42 per barrel for the third quarter, nearly doubling the $24 per barrel achieved in the second quarter and far exceeding the previous record of approximately $28 set in mid-2022.
The elevated margins stem from a substantial gap between refined fuel prices and crude oil costs. War-related disruptions to refineries in the Middle East and Russia have constrained global supplies of diesel and other refined products, supporting prices. Brent crude averaged $85.60 per barrel during the third quarter, down from $97.05 in the second quarter but significantly higher than the $68.14 recorded in the same period of the prior year. The diesel price premium over the global oil benchmark climbed above $100 per barrel for the first time, reflecting record-high refining profitability.
European gas markets also experienced significant price increases, with the benchmark gas price index more than doubling to €70.50 in August. Shell’s second quarter profit reached nearly $10 billion, more than double the prior year figure and the company’s second highest quarterly earnings on record. The company’s market value climbed to a record high of £36.23 per share, despite crude prices retreating from their spring peak of above $115 per barrel to approximately $100.
Shell’s gas production faced headwinds from damage to key facilities in the Gulf stemming from regional conflict, reducing output by a third from prewar levels. However, the company revised its gas production forecast upward to 740,000 to 780,000 barrels of oil equivalent per day, up substantially from its prior projection of 570,000 to 630,000 BOED for the quarter.
TotalEnergies, another major European refiner, similarly benefited from the market conditions. Its chief executive noted that integrated energy companies with significant European refining capacity are converting assets previously viewed as liabilities into highly profitable operations amid the global energy crisis.
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