Shell Reports Subdued Results in Oil Trading

Shell Anticipates Increased Output Amid Trading Setback

Shell has projected a rise in its oil and gas production, but cautioned that disappointing results from its oil trading operations are likely to negatively impact its earnings. This warning comes as the company faces mounting challenges due to ongoing declines in energy prices.

The energy giant, headquartered in London, announced on Thursday that its trading results for the fourth quarter are expected to fall well short of the previous quarter’s performance. As a result, Shell’s chemicals and products segment is forecasted to post an adjusted loss, a sharp reversal from the $550 million profit recorded in the prior quarter.

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According to analysts at RBC Capital Markets, the disappointing update has heightened attention on Shell’s routine $3.5 billion quarterly share repurchase program. They noted that a key issue is whether Shell’s leadership will maintain its current pace of buybacks despite the weak quarter, given the company’s robust financial position.

This development comes as major oil companies brace for a prolonged period of subdued prices. U.S. actions in Venezuela have raised the possibility of more supply entering an already oversupplied market.

Even with the uncertainty caused by the U.S. government’s removal of Venezuelan President Nicolas Maduro, oil prices did not surge. Brent crude hovered just above $60 per barrel during European trading hours. Meanwhile, ExxonMobil, another major U.S. oil company, stated on Wednesday that declining oil and gas prices would also hurt its profits.

Following the update, Shell’s share price dropped by 2.7%, settling at 25.85 pounds.

Trading operations among oil majors are typically shrouded in secrecy. Shell’s trading arm manages a wide array of liquid fuels—including crude oil, LNG, and diesel—while also participating in power trading.

In October, Shell’s improved trading results contributed to stronger-than-expected third-quarter earnings. However, this quarter’s weaker performance is anticipated to prompt analysts to lower their net income forecasts by roughly 10%, according to Jefferies analysts Mark Wilson and Kai Ye Loh.

Shell has refined its guidance for LNG output in the fourth quarter, now expecting between 7.5 million and 7.9 million metric tons, compared to its earlier range of 7.4 million to 8 million tons.

UBS analysts predict that lower prices and increased expenses will put pressure on European oil companies’ profits, though higher production volumes and refining margins may provide some relief.

Additional Financial and Production Updates

Shell reported that its refining margin indicator increased to $14 per barrel, up from $12 in the previous period.

The company also expects its upstream output—which covers the extraction of crude oil and natural gas—to range between 1.84 million and 1.94 million barrels of oil equivalent per day. This is a slight increase from the 1.83 million barrels per day produced in the third quarter.

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