Shell's Refining Margins Decline in Q3 2024 Amid Global Demand Weakness

Shell’s Refining Margins Decline Sharply in Q3 2024

Shell announced a sharp decline in refining profit margins for the third quarter of 2024, primarily driven by weaker global demand. In its trading update before the Oct. 31 quarterly results, Shell revealed that refining margins fell by nearly 30% to $5.5 per barrel, down from $7.7 per barrel in Q2. The drop is part of a broader market trend, with refining margins facing pressure due to sluggish economic activity, particularly in China, and the commissioning of new refineries.

Trading Results & Chemicals Division

The company also anticipates lower trading results for its chemicals and oil products division compared to the second quarter, reflecting the overall downturn in market demand. These lower margins align with the ongoing challenges facing the global refining market.

LNG Production and Upstream Outlook Upgraded

Despite these challenges, Shell, the world's leading liquefied natural gas (LNG) trader, increased its Q3 LNG production forecast. The new guidance ranges from 7.3 to 7.7 million metric tons, an upward revision from the previous 6.8 to 7.4 million-ton estimate. LNG trading performance is expected to be consistent with Q2 results. Furthermore, Shell raised its upstream oil and gas production outlook to 1.74 to 1.84 million barrels of oil equivalent per day (boed), from a previous 1.58 to 1.78 million boed.

Global Oil Price Slump

This update from Shell comes shortly after Exxon Mobil warned of Q3 financial challenges due to declining oil prices. Brent crude prices fell by 17% in Q3, marking the steepest quarterly decline in a year, ending at $71.77 per barrel amid concerns over global oil demand.

Conclusion

Shell's Q3 trading update reflects the challenges posed by weak refining margins and lower trading earnings in oil and chemicals. However, the upward revision in LNG production and upstream output outlook presents a positive note amidst the market's volatility.