Shell, the energy giant, announced on Wednesday that it expects its indicative refining margin to nearly double to $42 per barrel. This increase from $24 per barrel in the previous quarter is attributed to a global surge in fuel prices, which has significantly boosted the group's profit margins.
The expected margin expansion follows an agreement by G7 nations to release 100m emergency supplies of diesel and oil. This measure aims to counteract a developing supply crisis, with advanced economies working with the International Energy Agency to increase releases from emergency stockpiles due to ongoing market pressures.
In Britain, diesel prices exceeded 200p a litre for the first time ever last week, while oil prices have remained above three digits. Shell's increased refining profitability is expected to help offset a weaker performance in its chemicals division and cover approximately $2.5bn in anticipated cash outflows for German emissions certificate payments.
Despite high demand, Shell faced operational constraints due to summer heatwaves in western Europe, which caused low water levels on the Rhine River. These logistical issues disrupted supply chains and led to reduced processing at its Rheinland refinery in Germany, lowering overall refinery utilisation to between 93 per cent and 97 per cent, compared to 102 per cent in the second quarter.
However, the near-doubling of profit margins per barrel is anticipated to comfortably outweigh the slight dip in processed volumes. Additionally, Shell reported a boost in gas production following its acquisition of ARC Resources, raising its integrated gas production outlook to 740,000–780,000 barrels of oil equivalent per day.