UK Markets close in 4 hrs 22 mins

Shell shares slip on third quarter profit pressures

Shell has seen its shares knocked after the oil giant signalled profits will come under pressure in the third quarter following a record run.

The FTSE 100 stock fell 5% on Thursday following an update that showed a hit from weaker gas trading and lower refining margins.

Shell said its refining margins were about 15 US dollars a barrel (£13.30) in the three months to the end of September, down from 28 US dollars (£24.90) a barrel in the previous quarter.

The company said it expects this to have a “negative impact” of between one billion US dollars (£888 million) and 1.4 billion US dollars (£1.2 billion) on its third-quarter underlying earnings for products.

It added that margins in its chemicals arm has also slumped, to an expected minus 27 US dollars (£24) per tonne from 86 US dollars (£76) per tonne in the second quarter as a result of a drop in global demand for plastic.

And it said its gas business was suffering amid a “volatile and dislocated” market which, together with a seasonal drop in demand, would see “significantly lower” liquefied natural gas (LNG) and gas trading results.

It comes after the group has been enjoying record-breaking profits thanks to soaring energy prices, with adjusted earnings hitting nearly 11.5 billion dollars (£10.2 billion) for the second quarter of the year.

But oil prices have fallen back from around 120 US dollars (£107) a barrel in June to about 90 US dollars (£80) amid concerns over a recession in Europe and as surging inflation weighs on the global outlook.

The Opec oil cartel said on Wednesday it would cut production by two million barrels a day to stabilise prices after the cost of crude has fallen in recent months.

Shell’s update comes after it announced last month that chief executive Ben van Beurden will step down later this year after close to a decade in the top job.

He will hand over the reins to the company’s Canadian director of integrated gas, renewables and energy solutions, Wael Sawan.