Shell reported expectations for historically high refining profit margins during the July to September period, reaching $42 per barrel according to a trading update released mid-week. This represents a substantial increase from the second quarter’s $24 per barrel and significantly exceeds the previous record of approximately $28 per barrel established during the early phases of the Russia-Ukraine conflict.
The anticipated margin expansion reflects a widening gap between refined fuel prices and crude oil costs. While crude oil prices have moderated to around $100 per barrel following partial recovery of Gulf exports, fuel costs including diesel have remained elevated due to refinery damage in the Middle East and Russia from regional conflicts. This divergence between crude and refined product prices creates favorable conditions for refiners, particularly those based in the United States and Europe.
Shell’s overall financial performance has benefited substantially from market conditions. The company reported second-quarter profits approaching $10 billion, more than double year-over-year results and representing its second-highest quarterly earnings on record. The company’s market value reached a record high of £36.23 per share at the end of last month, supported by elevated European gas prices and diesel premiums.
Brent crude averaged $85.60 per barrel during the third quarter, compared with $97.05 in the prior period but remaining significantly elevated relative to historical levels. The diesel price premium over the global oil benchmark exceeded $100 per barrel for the first time, underscoring record refining profitability. European gas prices more than doubled from the previous year, with the benchmark index reaching €70.50 in August.
Shell’s gas production operations have faced headwinds from regional disruptions, with damage to key Gulf facilities reducing output by approximately one-third from prewar levels of 900,000 barrels of oil equivalent daily. However, the company revised production expectations upward to 740,000 to 780,000 BOED for the quarter following its early-September completion of the ARC Resources acquisition, which is projected to add approximately 370,000 barrels daily to combined production capacity.
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