ii view: Shell shares skid to four-week low

First-quarter trading update to 31 March

• Expects gas production as low as 880 kboe/d in Q1 2026 versus 948 kboe/d in Q4
• Expects Q1 refining margin of $17 per barrel, up from $14 in Q4
• Expects non-cash net debt to be impacted by $3-4 billion of long-term shipping leases

ii round-up:

Energy giant Shell (LSE:SHEL) today reduced expected first quarter gas production given the impact of the war in the Middle East on its Qatari facilities over recent weeks. 

Shell now expects gas production of between 880,000 and 920,000 thousand barrels of oil equivalent per day (kboe/d), down from a previous estimate of up to 980 kboe/d and below fourth quarter output of 948 kboe/d.  

Against the backdrop of a two-week ceasefire in the Middle East and a reopening of shipping through the Strait of Hormuz, Shell shares slumped as much as 7% in UK trading to their lowest since mid-March. Shares came into this latest news up by close to a third so far in 2026. That’s similar to US major Chevron Corp (NYSE:CVX) but less than the 38% gain for BP (LSE:BP.) year-to-date.

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The price of Brent crude oil plunged almost 15% following the ceasefire announcement to around $93 per barrel, although it's still up over 50% so far in 2026.

Shell now expects a first quarter oil refining margin of $17 per barrel, up from $14 during the prior fourth quarter. Refining plant utilisation is expected to come in at up to 99% from Q4’s 95%. 

Profits from the group’s energy trading business are expected to be significantly higher than Q4 given the operational disruption caused by the war in the Middle East. 

The margin for chemical production is expected to remain little changed from the prior quarter at $139 per tonne.

LNG production volumes are also expected to be little changed at around 7.8 mega tonnes, with increased Canadian production countering weather hindered Australian output and reduced flows from Qatar.  

Shell now expects non-cash net debt to be impacted by $3-4 billion of long-term shipping leases following events in the Middle East. 

First-quarter results are scheduled for 7 May.

ii view:

In 2022, the energy giant changed its name from Royal Dutch Shell to just Shell, moving its headquarters from the Netherlands to the UK. Alongside its upstream exploration and production business, its downstream operations serve around 33 million retail customers a day at 47,000 service stations. It has around 73,000 electric vehicle (EV) charge points. 

Strategic focuses outlined in March 2025 include becoming the world’s leading integrated gas and Liquefied Natural Gas (LNG) business, as well as making Shell simpler, more resilient and more competitive.

For investors, operational challenges and potentially higher costs caused by the war in the Middle East now need to be considered. Higher inflation because of soaring energy prices may now cause interest rates to stay higher for longer, dampening economic activity and reducing energy demand. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap, while further oil and gas price volatility may accelerate government moves globally to diversify energy supplies to alternatives such as nuclear power.  

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To the upside, reduced Middle East production and shipping supply challenges will likely offer support to fossil fuel prices, at least in the near term. Supply disruption has boosted trading profits. Structural cost reductions now total over $5 billion since 2022, while a diversity of operations regularly allows one area of strength to counter another of weakness.

In all, volatile energy prices are unlikely to go away, causing further sharp moves in the share price. That said, the world’s addiction to oil and a prospective dividend yield of around 3% mean Shell continues to justify its place in many diversified investor portfolios.   

Positives: 

• Diversity of operations
• Focus on shareholder returns

Negatives:

• Uncertain economic outlook
• The weather can raise operational challenges

The average rating of stock market analysts:

Strong hold