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Shell says oil, gas trading strong as war drives volatility
Update offers first glimpse into how Big Oil fared in quarter when crude prices hit 4-year high
Shell Plc said it delivered another strong oil and gas trading result in the second quarter as it benefited from the market turmoil caused by the Iran war.
Oil trading profit came in line with a strong first quarter while gas trading results were “significantly higher,” the London-based energy giant said in a statement on July 7, ahead of earnings results later this month. Traders often profit when markets are volatile.
READ MORE: 2 tankers hit in latest attacks in the Strait of Hormuz
The Iran war has led to a profit bonanza for the world’s top energy merchants as the conflict caused unprecedented disruption to oil and gas supply. Tanker companies also saw revenue for leasing out their ships surge as the conflict locked vessels inside the Persian Gulf and forced buyers to look further afield for cargoes. While best known as oil majors, Shell, BP Plc and TotalEnergies SE have vast trading desks, too, helping them to benefit from the same turmoil.
Shell shares rose as much as 2.7% on July 7 in London trading.
Shell’s trading update offers a first glimpse into how Big Oil fared in a quarter when crude prices hit their highest since the invasion of Ukraine in 2022, before slumping as Persian Gulf producers ramped up flows through the Strait of Hormuz. The performance of Shell’s global trading operation is closely watched as it can be a key driver of earnings.
Brent, the international benchmark crude price, spiked above $126 a barrel at the end of April. It then fell more than 40% to trade around $72 since the end of June.
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Shell’s natural gas production took a hit as output in Qatar remained offline, with the Persian Gulf country representing about 10% of the company’s global oil and gas volumes. Still, Shell sees a slightly higher range of natural gas production in the second quarter than it previously expected thanks to its global portfolio.
“The strong trading performance is offsetting the weaker performance due to Qatar disruption,” Barclays analyst Lydia Rainforth said in a note on July 7.
The outlook for liquefied natural gas shipments through Hormuz remains uncertain, however, with another tanker laden with fuel from Qatar struck on July 7.
Overall, Shell’s oil and gas production was within the range it projected for the second quarter due to output outside the Middle East.
Refining margins improved, as the company and its peers have been working to process fuels such as jet and diesel to make up for Middle East disruptions. Chemicals margins also improved.
