Shell faces up to £3.5bn in impairments but gas trading improves

This is partly driven by assets linked to its Singapore refining and chemicals hub, which the London-based firm is reportedly looking to sell.

On Monday, Shell told shareholders that gas trading for the final three months of 2023 is set to have been “significantly higher” than the third quarter due to seasonal shifts in the market.

It forecast production of between 880 and 920 kilo barrels of oil equivalent per day (kboe/d) in the integrated gas division.

Production in the firm’s upstream business, which includes its extraction of oil, is forecast to be between 1,830 and 1,930 kboe/d in the quarter.

Shell said it expects a 200 million dollar earnings gain from joint venture operations in the upstream arm, but said this will be offset by exploration well write-offs.

Meanwhile, it said its chemicals and products business is set to have recorded an adjusted earnings loss for the quarter.

Chemicals and products trading was “significantly lower” than during the previous quarter.

Victoria Scholar, Head of Investment, interactive investor, said: “Shell reported a mixed set of results – it is expecting quarterly integrated gas trading to be significantly higher than the third quarter thanks to seasonal factors and increased optimisation opportunities.

"However, investors are focusing on the fact that Shell warned that profits from trading oil products and chemicals would be lower resulting in a loss in that division.

"It is also facing an impairment charge of between $2.5bn and $4.5bn in the fourth quarter, relating to its Singapore refining and chemicals hub. Consequently, shares in Shell are trading sharply lower, underperforming the FTSE 100.

She added: “Shell has been facing some price target cuts from the analyst community so far this year including from Morgan Stanley and Bernstein ahead of today’s update.

"Over the last six months, shares in Shell are up by around 10 per cent thanks to higher underlying oil prices since last summer and better-than-expected third quarter earnings.

"But strong supply in the United States and a sluggish demand outlook could keep a lid of oil price gains this year. However offsetting this are OPEC+ supply cuts, possible interest rate cuts in 2024 and the potential for China’s economy to improve.”

Shell is scheduled to report fourth quarter earnings on February 1. Ms Scholar said that, after a difficult week to kick off 2024, the FTSE 100 extended its losses on Monday morning amid weakness across European markets.

She added: “US futures are pointing lower after staging modest gains on Friday but still finishing the week in the red, snapping a nine-week winning streak, the longest since 2004.”

“Oil prices are under pressure today with Brent and WTI down by around 1 per cent each after Saudi Arabia cut its selling prices.”