Shell, the leading global trader of liquefied natural gas (LNG), announced on Friday that its Q2 gas trading results are projected to be “significantly lower” compared to the previous quarter. However, these results align with the performance of the same quarter in the past two years.
The wholesale gas prices experienced fluctuations during April-June, influenced by maintenance activities in Norway, a key supplier. During this period, Shell unexpectedly extended a shutdown at its Nyhamna processing plant.
Shell attributed the reduced gas trading result to “seasonality and fewer optimization opportunities”. The company does not disclose specific figures for its gas trading results or its contribution to the overall business.
The benchmark front-month Dutch gas contract was last traded at 32.90 euros per megawatt hour, a decrease from over 100 euros last year – which included a surge to over 300 euros in August – and 70 euros at the beginning of this year. Shell shares saw a modest increase of around 0.5% at 1234 GMT, slightly behind the European index of oil and gas companies (.SXEP), which rose by 0.7%.
RBC equity analyst Biraj Borkhataria noted in a report, “Shell’s trading update included a number of operational indicators which were broadly in line with our forecasts.” He added, “Weaker trading across oil and gas should be expected by the market given lower gas prices and the seasonality of Shell’s LNG portfolio.” Shell’s trading typically yields smaller profits in Q2 due to reduced seasonal demand.
Shell also indicated that its chemicals and products business’s trading performance is likely to be lower than Q1, with the indicative refining margin expected to fall to $9 a barrel from $15 a barrel.
Earlier this week, U.S. competitor Exxon also predicted lower refining margins.
In a prelude to its Q2 results due on July 27, Shell also highlighted $3 billion in writedowns for the quarter, primarily due to a 1% increase in the discount rate used for impairment testing. A spokesperson explained this as an accounting adjustment to reflect a higher interest rate environment.