By Adria Calatayud
Shell cut its outlook for first-quarter natural-gas production but said it expected a boost from oil trading, as the energy industry counts the cost of the damage caused by the war in the Middle East.
The U.K. energy giant said Wednesday that the output of its integrated gas segment would take a hit from lost Qatari volumes due to the conflict in the first quarter, but that its oil trading operations would deliver a significantly higher result than in the prior quarter.
The update from Shell comes after the war in the Middle East set off a volatile ride in energy markets and placed some of the oil-and-gas industry's biggest investments on the firing line. One of Shell's crown-jewel assets, the Pearl gas-to-liquids facility in Qatar, was targeted in the conflict.
Shares in oil companies have rallied since the U.S. and Israel began bombing Iran--and Tehran retaliated by blockading the Strait of Hormuz and attacking its neighbors--as crude prices surged past $100 a barrel to hit levels last seen in 2022, in the wake of Russia's full-scale invasion of Ukraine.
Oil futures fell back below $100 a barrel after President Trump said Tuesday that he had agreed to a two-week cease-fire with Iran, which said it would reopen the Strait of Hormuz. Shares in Shell fell 7.4% shortly after the opening bell, as oil stocks followed crude prices lower.
Ahead of the agreement announcement, some analysts had said that oil prices would likely remain higher than before the conflict broke out even under a cease-fire as the war caused damage to energy infrastructure that might take years to repair and disrupted energy flows.
Shell said it expected first-quarter output in its integrated gas segment to range from 880,000 to 920,000 barrels of oil equivalent a day, against its prior guidance of between 920,000 and 980,000 barrels of oil equivalent a day. For the fourth quarter, the business produced 948,000 barrels of oil equivalent a day.
The company last month said the Pearl facility, the largest in the world that turns gas into liquid petroleum products, was hit by an Iranian attack.
Shell narrowed its outlook for first-quarter liquefied natural gas volumes to between 7.6 million and 8 million metric tons from 7.4 million to 8 million tons previously. This reflects the ramp-up of LNG Canada that was partly offset by Australia weather constraints and Qatar LNG outages, it said.
On the other hand, the company forecast oil trading for the first quarter to be significantly higher than in the previous quarter. Energy companies' trading businesses tend to benefit from market volatility.
As long-term LNG contracts usually have a pricing lag, gas trading is expected to be in line with last year's fourth quarter, Shell said.
Shell said the impact of unprecedented volatility in commodity prices on inventory would lead to a working-capital outflow of between $10 billion and $15 billion in the first quarter, which compares with a positive $1.3 billion the prior quarter. Noncash net debt is expected to include an increase of between $3 billion and $4 billion in variable components of long-term shipping leases, it added.
The update shows the resilience of Shell's operations outside of the Qatari outage and investors will likely look through a monster working-capital build, which highlights how unprecedented the current environment is, RBC Capital Markets analysts wrote in a note to clients.
Write to Adria Calatayud at adria.calatayud@wsj.com
(END) Dow Jones Newswires
April 08, 2026 03:29 ET (07:29 GMT)
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