Shell Adjusts Gas Production Outlook Amid Middle East Conflict

Shell has revised its first-quarter gas production outlook downward, attributing the change to disruptions caused by the ongoing conflict involving the U.S., Israel, and Iran. The British oil giant now expects its integrated gas production to be between 880,000 and 920,000 barrels of oil equivalent per day (boed), a decrease from its previous forecast of 920,000 to 980,000 boed. This adjustment follows a production level of 948,000 boed in the fourth quarter of 2025. The company also anticipates liquefied natural gas (LNG) production to range from 7.6 million to 8 million metric tons, slightly up from earlier estimates but impacted by weather constraints and outages in Qatar.

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The conflict has led to significant volatility in global energy markets, with Brent crude oil prices soaring to multi-year highs near $120 per barrel. This surge is expected to result in a substantial increase in trading profits for Shell, particularly within its chemicals and products division, which includes its oil trading desk. The company forecasts adjusted earnings for its renewables and energy solutions unit to rise between $200 million and $700 million, a notable increase from $131 million in the previous quarter.

Reuters

Shell's working capital is projected to swing to between minus $10 billion and minus $15 billion, reflecting the unprecedented volatility in commodity prices affecting its inventory. Analysts from RBC Capital Markets have noted that despite these challenges, Shell's strong balance sheet may allow investors to overlook short-term liquidity concerns.

Reuters

The conflict has also directly impacted Shell's operations in Qatar. The Pearl gas-to-liquids facility, which can process up to 1.6 billion cubic feet per day of wellhead gas, sustained damage during attacks in mid-March, halting production. Shell has indicated that full repairs to the facility could take around a year.

RTE (Radio Television of Ireland)

The geopolitical tensions have led to energy rationing in several regions, particularly in Asia, as supply chains have been disrupted. Shell's CEO, Wael Sawan, has expressed concerns about potential energy shortages in Europe if the Strait of Hormuz remains closed, emphasizing the company's efforts to collaborate with governments to address the ongoing supply crisis.

The Guardian

While Shell is poised to benefit from rising energy prices, critics argue that the situation underscores the vulnerabilities of global energy supply chains and the risks associated with geopolitical conflicts. The volatility in energy markets raises questions about the long-term sustainability of such price surges and their impact on consumers and economies worldwide.

The Guardian

• “Shell is expected to report a monster working capital build of $10-15bn (billion), highlighting how unprecedented the current commodity price environment is,” — RBC Capital Markets Analyst

Reuters

• “South Asia was first to get that brunt. That’s moved to south-east Asia, north-east Asia and then more so into Europe as we get into April,” — Wael Sawan, CEO of Shell

The Guardian

This situation illustrates the complex interplay between geopolitical events and energy markets, with Shell navigating both challenges and opportunities in a rapidly changing landscape.

The Guardian