Shell warns that Middle East conflict affects first-quarter performance, refining margins rise

Investing.com - Shell Plc said on Wednesday that the indicative refining margin for the first quarter of 2026 rose to $17 per barrel, while warning that “unprecedented volatility in commodity prices” is expected to lead to a significant outflow of working capital.

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The company said that this quarter’s working capital movement is expected to be between negative $15 billion and negative $10 billion, reflecting the impact of price volatility on inventories and accounts receivable.

In its chemicals and products segment, the indicative refining margin rose from $14 per barrel in the fourth quarter of 2025 to $17 per barrel, while the indicative chemicals margin was essentially flat at $139 per tonne, versus $140 per tonne previously.

Combined natural gas production is expected at 880k to 920k barrels of oil equivalent per day, down from 948k barrels of oil equivalent per day in the prior quarter, reflecting the “impact of the Middle East conflict on Qatar’s production.” Liquefied natural gas liquefaction volumes are expected to be 7.6 million to 8.0 million tonnes, compared with 7.8 million tonnes in the fourth quarter.

Upstream production is expected at 1.76 million to 1.86 million barrels of oil equivalent per day, versus 880k barrels of oil equivalent per day in the prior quarter, including a reduction in output following the establishment of the Adura joint venture.

In the marketing business, sales volumes are expected to be 2.55 million to 2.65 million barrels per day, versus 920k barrels per day in the fourth quarter; adjusted earnings are “expected to be significantly higher than in the first quarter of 2025.”

Chemicals facilities utilization is expected at 81% to 85%, higher than 76% in the prior quarter, while refinery utilization is expected at 95% to 99%, compared with 95% previously.

In the renewables and energy solutions business, adjusted earnings are expected to be between $200 million and $700 million, versus $100 million in the fourth quarter, with the trading and optimization business expected to be “significantly higher than in the fourth quarter of 2025.”

Adjusted earnings at the corporate level are expected to be between negative $1.0 billion and negative $0.8 billion, compared with negative $0.6 billion in the prior quarter.

At the overall group level, income tax paid is expected to be between $2.0 billion and $2.8 billion, versus $2.6 billion in the fourth quarter, and the change in financial derivatives is expected to be between negative $1.0 billion and positive $4.0 billion.

The company also said that net debt, excluding cash, is expected to be affected by an increase of $3.0 billion to $4.0 billion from the variable component in long-term shipping leases.

Shell added that given the ongoing situation in the Middle East, its outlook is “facing greater uncertainty.”

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