Faltering fossil fuel demand set to knock profits at Shell

Analysts have forecast that it will post earnings of £24.1 billion for the year, down from £28.3 billion in 2023.

It comes after a year in which oil prices have steadied, and demand has fallen – partly as a result of the growing popularity of electric vehicles.

The oil supermajors, including US giants ExxonMobil and Chevron, have all suffered falling margins in their oil refining businesses this year as a result.

That came after record profits for the fossil fuel companies in previous years after oil prices spiked during the global energy crisis.

And 2025 could bring more weakness in oil prices, analysts said, with the US, Canada and Brazil set to increase their production and continued weakness in demand from the key Chinese market.

Separately, Shell said earlier in January that its liquefied natural gas (LNG) production fell during the final quarter.

The company is the world’s largest trader of LNG, the super-chilled fuel which makes up a significant part of many countries’ energy supplies.

The company said this was because of “lower feedgas” – the amount of raw gas used in the process – and fewer cargoes carrying the product than in the previous period.

Derren Nathan, head of equity analysis at Hargreaves Lansdown, said: “Shell’s recent trading statement revealed that while most business units have been trading broadly in line with previous guidance, the production and liquefaction ranges for integrated gas has been lowered.

“These are set to come in below third quarter levels, reflecting planned maintenance at its processing facility in Qatar, as well as the timing of shipments from offshore gas fields.

“The weakness should be partially offset by an improved outlook for corporate costs.

“As ever investors are likely to have a watchful eye on the outlook for shareholders distributions, with buyback programmes of at least three billion dollars announced in each of the last 12 quarters.

“Of course, no further payouts can be guaranteed. And with a new financial year under way expect an update on the company’s capital allocation priorities.”