Shell Refining Margins Jump 75% Amid Global Fuel Crunch
Shell expects its third-quarter refining margin to reach a record $42 per barrel as global fuel supplies tighten.
Shell expects its indicative refining margin for the third quarter to nearly double sequentially, hitting a record high of $42 per barrel up from $24 per barrel in the second quarter, according to an update note published on Wednesday ahead of its full results release on October 29. The jump is set to combine with strong trading results and high oil and gas realizations to yield continued windfall profits for the supermajor.
Global refining margins have soared over the summer months as limited fuel flows from the Middle East and a Russian ban on diesel exports compounded a wider international fuel crunch. Refineries across the United States, Europe, and Asia have struggled to offset an estimated 7 to 8 million barrels per day of refined petroleum products taken off the market.
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Operational Impacts and Production Guidance
For Shell, refinery utilization rates dropped from 102% in the second quarter to an estimated 93% to 97% in the third quarter. The company indicated that low water levels on the Rhine River impacted the utilization rate at its Rheinland refinery in Germany. Trading divisions in gas and fuel are projected to remain in line with the second quarter.
While oil production is expected to be lower for the third quarter, Shell lifted its natural gas output guidance following its acquisition of Canadian producer ARC Resources, which was finalized in early September. Gas production is now forecast between 740,000 and 780,000 barrels of oil equivalent per day, up from 631,000 barrels of oil equivalent per day in the previous quarter.
Key facts
- Shell's indicative third-quarter refining margin is expected to reach $42 per barrel, up from $24 in the second quarter.
- Full third-quarter results are scheduled for release on October 29.
- Refinery utilization dropped to an estimated 93% to 97% due to low water levels on the Rhine River.
- Natural gas output guidance was raised to 740,000 to 780,000 barrels of oil equivalent per day following the ARC Resources acquisition.
Source: oilprice.com
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