Shell expects lower refining margins and a loss in its chemicals business to weigh on its third-quarter earnings, which could be offset or partly offset by higher LNG production volumes. Third-quarter refining margins slumped by almost 30%, with the indicative refining margin for Shell falling to $5.5 per barrel, down from $7.7 a barrel in the second quarter of the year, the supermajor said in its third quarter update note on Monday.
The rise in LNG volumes could help Shell, the world’s top LNG trader, offset some of the weakness in refining and chemicals. The falling refining margins have already hit the second-quarter earnings of the supermajors, and further declines in Q3 are expected to continue to weigh on the profits. The refining industry is witnessing the end of the supercycle of huge profits and record margins that began with the post-pandemic surge in demand and war- and sanctions-related supply disruptions.