Shell increases its Q2 gas production forecast and highlights improved gas trading performance.

Shell announced on Tuesday that it has increased its gas production forecast for the second quarter and expects gas trading to be significantly stronger than the previous quarter, which will help mitigate disruptions caused by conflicts in the Middle East.

Major oil companies are capitalizing on increased volatility in the energy markets due to the U.S.-Israeli conflict with Iran, which has led to dramatic fluctuations in crude oil and natural gas prices, enhancing trading profits for firms like Shell, BP, and TotalEnergies.

In its quarterly update, Shell indicated that output from its integrated gas division is projected to be between 610,000 and 650,000 barrels of oil equivalent per day (boed) for the April to June quarter, an increase from its earlier guidance of 580,000 to 640,000 boed. The output was 909,000 boed in the first quarter. The company also raised its forecast for LNG liquefaction volumes to between 7.4 million and 7.8 million metric tons, up from 6.8 million to 7.4 million tons, having produced 7.9 million tons in the first quarter.

Shell reported that trading results for its integrated gas segment are expected to be significantly higher than in the previous quarter, while results from its chemicals and products division, which encompasses a large oil trading operation, are anticipated to align with the strong performance from the previous quarter. Citi increased its forecast for Shell's second-quarter earnings per share by 13%, noting the company’s "incrementally positive" update, including advancements in trading, chemicals, and fuels marketing. Shell's shares rose by 3.2% at 0825 GMT, outpacing a 0.3% rise in the broader European energy sector.

In the second quarter, the Brent crude global benchmark averaged approximately $97 a barrel, compared to $78 in the first quarter and $67 a year prior. The benchmark Dutch front-month gas contract at the TTF hub averaged around €46 per megawatt-hour during the quarter, up from approximately €40 per MWh in the previous quarter and €36 per MWh a year earlier.

Shell expects a working-capital inflow of $1 billion to $6 billion in the second quarter, contrasting with an $11.2 billion outflow in the first quarter, reflecting the effects of commodity price volatility. Working capital is calculated as current assets minus current liabilities. The company indicated higher indicative refining margins of about $20 per barrel and chemicals margins of about $240 per ton for the second quarter, although it noted that realized margins fell below those levels due to market distortions.

Production at Shell's Pearl gas-to-liquids facility in Qatar was suspended in March following an attack on Ras Laffan Industrial City that damaged one of the facility’s two trains. Shell has stated that repairs may take around a year. Approximately 20% of Shell's oil and gas production, or 550,000 boed, is sourced from the Middle East, with around 10% tied to Qatar. Shell's adjusted earnings reached a two-year high of $6.9 billion in the first quarter, exceeding expectations, largely due to gains associated with the Middle East conflict. As a result, the company subsequently raised its dividend by 5%.