Shell has never squeezed so much diesel out of a barrel of crude oil.
The British energy major ran its refineries hard in the third quarter to maximize diesel production during an unprecedented supply squeeze that has roiled geopolitics ahead of the U.S. midterm elections.
Shell plans to continue doing that, but Chief Executive Wael Sawan has a plea to politicians: Avoid market interference that would reduce the incentive for Shell and other energy producers to increase output.
The energy industry got a scare last month when President Trump said his administration was considering restricting U.S. diesel exports to bring down prices domestically. Trump later said restrictions weren't on the table.
"Our counsel to governments has been: Be careful that through interventions we do not mask these important price signals which are critical to make sure that the right products are being produced for our customers," Sawan said in an interview.
The wars in Iran and Ukraine have squeezed global diesel exports, pushing prices to record highs. The Trump administration has been searching for ways to lower prices ahead of the midterm elections next week, most recently pressuring Ukraine to stop striking refineries in Russia, which is among the largest exporters of diesel. Most of the supply shortfall, however, is due to Middle East producers being largely unable to export because of the war with Iran.
Without Middle East and Russian supply, the U.S. has stepped in to be the main global exporter of diesel.
Shell ran its refineries at 96% of capacity during the quarter. Sawan said the figure would have been higher were it not for low water levels on the Rhine River that forced it to cut production at its refinery in Germany.
Sawan also said Shell has started to base trading teams inside its refineries so they can adapt to changes in the market in real time. Shell's diesel production was up 5% compared with a year ago, Chief Financial Officer Sinead Gorman said.
Shell hiked its quarterly share buyback to $5 billion after earnings and cash flow soared during the quarter, riding the surge in energy prices sparked by the Iran and Ukraine wars.
Third-quarter adjusted earnings -- a closely watched metric that strips out certain commodity price adjustments and one-time charges -- nearly doubled to $10.81 billion from the $5.43 billion it reported in the same period last year. Analysts had expected $10.33 billion, according to estimates compiled by Vara Research.
Thursday's increased buyback came after Shell scaled back its quarterly repurchases earlier in the year to $3 billion from $3.5 billion.
The conflict in the Middle East has kept oil prices above $100 a barrel and gas prices high. Prices have stayed high despite a combination of workarounds -- such as pipelines and ship-to-ship transfers -- enabling oil flows out of the Strait of Hormuz to return to preconflict levels. A geopolitical premium remains embedded in prices, with investors unsure where the conflict is headed.
Shell's refineries -- where crude oil is turned into diesel, jet fuel and myriad oil products -- were the standout winners of the third quarter.
Shell's margins jumped to a record level of $42 a barrel over the third quarter, far exceeding the $28.04 a barrel the company recorded shortly after Russia's full-scale invasion of Ukraine in 2022 that upended energy markets.
Refining margins weakened slightly early in the fourth quarter, but the market remains tight and volatile, with only very minor demand destruction visible so far, Gorman said in a call with reporters.
The impact of the Mideast conflict on Shell's natural-gas unit has been mixed. One of its crown-jewel assets, the Pearl gas-to-liquids facility in Qatar, was targeted in attacks. Shell has partially restarted a section of the plant to test production and will place the limited amount of product into storage. It still expects to restart production at the damaged facility at the end of the first-quarter next year.
For rivals with LNG facilities outside of the Gulf, the surge in natural-gas prices has offered an earnings windfall. Shell, with LNG operations around the globe, benefited with earnings in its integrated gas unit jumping to $3.04 billion.
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