Shell (SHEL.L) fell as much as 5% on Thursday after it issued a profit warning for the third quarter.
The FTSE 100 company reported a drop in refining margins, which turns crude oil into products such as petrol and diesel. This is expected to fall to $15 (£13.33) per barrel, down from $28 per barrel in the previous three months.
This will take up between between $1bn and $1.4bn off Shell’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
It also posted a negative margin of $27 per metric tonne in its chemical division, down from $86 the quarter before, which is often seen as an indicator of the strength of the wider economy.
The weak trading update pointed to signs that the British oil major’s record run of earnings could be coming to an end as Brent crude (BZ=F) has dropped steadily since June.
It comes as major industries across Europe are struggling to cope with soaring gas prices, exacerbated by Russia’s invasion of Ukraine. However, Shell has managed to cash in on the record prices, posting record profits of $11.5bn in the second quarter.
Shell is expected to report net earnings of $10.5bn in the third quarter, according to a Refinitiv average of analysts' forecasts. This compares with net earnings of $11.5bn in the second quarter.
“In what is a notoriously cyclical business, Shell is grappling with a dysfunctional and volatile gas market as well as expectations of softening oil demand, particularly from China as the global economy cools,” Victoria Scholar, head of investment at interactive investor, said.
“Shell has been a major FTSE 100 winner this year amid the equity market turmoil, up by around 40% year-to-date.”
The update from Shell comes ahead of its results on 27 October.
Jefferies said the oil firm’s update "weak" due to low gas trading and high cash taxes, while analysts at Giacomo Romeo said contribution from Shell's integrated gas arm was "significantly lower" in the quarter.
RBC called the update "disappointing".
"Overall, we see the statement as disappointing given the weaker IG (Integrated Gas) trading result, coupled with another working capital outflow," RBC Capital Markets analyst Biraj Borkhataria said in a note.
"We would expect to see consensus downgrades on the back of this update," he added. RBC has an "outperform" recommendation on Shell.
Meanwhile, on Wednesday, the OPEC+ Joint Ministerial Monitoring Committee recommended a cut of 2 million barrels of oil per day at their meeting in Vienna.
This is the equivalent of around 2% of global oil demand as the group looks to stop a slide in oil prices caused by the weakening global economy.
Watch: Why are gas prices rising?