Shell reports reduced oil and gas trade profits in the second quarter due to market weakness.
In an upcoming earnings report to be published on July 31st, the refining and chemicals division of Shell is expected to report a loss. This comes as the global energy giant grapples with a significant decline in earnings from its oil and gas trading activities, which form part of the Integrated Gas segment.
The weaker contribution from trading has eroded an increase in margins from refining and chemicals, causing Shell's second-quarter profit to be lower than initially anticipated. The decline in trading profits is primarily due to a substantially lower performance from Shell's oil and gas trading operation, referred to as "Trading & Optimisation," compared to the first quarter of 2025.
The reasons for this weakness in the trading operation are not explicitly detailed, but it is reflected in Shell's updated outlook for Q2 2025. The Integrated Gas segment shows a more cautious expectation compared to Q1, including reduced production volumes and stable or slightly increased operating expenses, while the trading component notably decreases.
Other factors contributing to the anticipated decline in profits include the US President's unleashing of a global trade war in the second quarter, which affected oil prices, and OPEC+ boosting supply, which also had a negative impact on prices. Oil prices swung wildly in the second quarter, reaching a four-year low in April and then spiking in May before falling again.
Despite these challenges, Shell's oil and gas volumes for the second quarter are in line with expectations. The company's LNG Canada project, which started its first exports recently, is one of several new projects scheduled to come online globally in the next few years. As the world's biggest trader of liquefied natural gas (LNG), Shell is well-positioned to benefit from the forecasted global demand for LNG, which is expected to grow by about 60% by 2040.
Shell's CEO, Wael Sawan, has been focusing on cutting costs, boosting reliability, and shedding underperforming assets to improve the company's performance. The company's shares fell as much as 2.6% in London following the announcement of weaker trading contributions.
However, it's important to note that Shell has announced it has no intention of making an offer for BP, quelling months of speculation. This announcement ties Shell's hands for the next six months under UK takeover rules.
In conclusion, while Shell faces challenges in its oil and gas trading operations, the company remains optimistic about its future, particularly in the LNG market. The company continues to focus on improving its performance and positioning itself for long-term success.
The anticipated decline in Shell's profits is not only due to the weaker contribution from its trading activities in the oil-and-gas sector, but also the US President’s initiation of a global trade war and OPEC+'s increased supply, both of which had a negative impact on oil prices. On a positive note, Shell's oil and gas volumes for the second quarter are as expected, and the company expects a 60% growth in global LNG demand by 2040, positioning Shell well in the LNG industry, given its status as the world's biggest LNG trader.
