Global energy company Shell is projecting unprecedented profits for its refining segment in the third quarter, driven by a sharp rise in refined-product prices amid worldwide fuel shortages. The company expects refining margins to climb to around $42 per barrel for the July-September period, a significant increase from $24 per barrel in the previous quarter. This estimate surpasses the previous record of about $28 per barrel, observed during the early days of the Russia-Ukraine conflict.
The increase in refining margins is attributed to a widening gap between the cost of crude oil and the price of refined fuels. This has been further exacerbated by disruptions to refinery operations in the Middle East and Russia, which have constrained global fuel supplies. Meanwhile, crude oil prices have eased slightly from earlier highs. Brent crude, the global benchmark, averaged $85.60 a barrel in the third quarter, down from $97.05 in the second quarter, but still higher than the $68.14 average during the same period last year.
Adding to the profitability of refineries, diesel prices have soared, with the premium over the global oil benchmark surpassing $100 a barrel for the first time. This surge in diesel prices has created particularly beneficial conditions for refineries located in Europe and the United States.
In addition to its refining business, Shell anticipates an increase in gas production following its acquisition of Canada’s ARC Resources. The company forecasts production levels to reach between 740,000 and 780,000 barrels of oil equivalent per day, up from the earlier estimate of 570,000 to 630,000 barrels per day.