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Falling oil price ends Shell era of record profits: energy giant shares fall 2.8% after profits were announced to fall by £1.2bn
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Shell warned that the era of record profits was drawing to a close as its refining and natural gas divisions were hit by lower oil prices and volatile energy trading in global markets.
The fossil fuel giant estimated that up to £1.2 billion of its revenue would be cut in the third quarter of the year. shares 2.8 percent down.
The refinery’s profit margins, which convert crude oil into gasoline, diesel and other products, fell to $15 a barrel of oil, from $28 in the second quarter.
Volatile trading: Fossil fuel giant Shell estimated that up to £1.2bn of its profits would be knocked off in the third quarter of the year – pushing shares down 2.8%
The sharp drop came amid a decline in the price of Brent oil, which reached a 14-year high of nearly $128 a barrel in March following Russia’s invasion of Ukraine.
The price remained high until early June, allowing energy companies to make significant profits.
Shell made a record profit of £8.1 billion in the first quarter of 2022, a milestone it reached just three months later by posting a second quarter profit of £10.2 billion.
But Brent is now trading around $94 a barrel amid fears a global recession will hit demand.
Meanwhile, Shell forecast that the results of its natural gas business would be “significantly lower” than in the previous quarter due to what it said is a “volatile and disrupted” market and lower demand during the summer months.
Profit margins at the company’s chemicals division also collapsed, falling to minus $27 a ton, compared to a positive $86 in the second quarter amid a decline in demand for plastics.
“While Shell has benefited from the surge in energy markets in 2022, it is not immune to a slowdown that will affect demand for refined products,” said Russ Mold, investment director at AJ Bell.
It has been a difficult week for Shell investors after outgoing boss Ben van Beurden warned that taxes on companies in the oil and gas industry are ‘inevitable’ to help the poorest in society.
There were signs that Shell’s fortunes could improve towards the end of the year after the Opec+ cartel of oil-producing countries, including Russia and Saudi Arabia, announced larger-than-expected production cuts, expected to push up energy prices.
Jorge Leon, senior vice president of research firm Rystad Energy, predicted that the planned cuts would push the price of Brent oil to more than $100 in December, despite Opec+ forecasting that production would increase by just 1.2 million barrels of oil per day. would decrease, as opposed to the planned drop of 2m.