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Shell Expects Improved Earnings from Gas Trading in Q3

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Shell Expects Improved Earnings from Gas Trading in Q3

Shell Plc has reported a rebound in earnings from gas trading in the third quarter, following a dip in the previous period. While the performance of oil majors' trading divisions has returned to historical norms this year after the exceptional profits of 2022, Europe's demand for liquefied natural gas (LNG) remains strong. This presents an opportunity for companies like Shell to boost margins by redirecting LNG cargoes from other regions. Despite scheduled maintenance affecting Shell's LNG production, trading and optimization performed better compared to the period from March to June.

Chemicals and Products Unit

Shell expects earnings from its chemicals and products unit to be in line with the weaker performance seen in the second quarter. Although smaller than the oil and gas segment, the petrochemicals business is still a significant part of Shell's operations. The global economic weakness has impacted this sector, with Exxon Mobil Corp. also experiencing a drop in chemicals profitability.

Renewable and Energy Solutions

Adjusted earnings at Shell's renewable and energy solutions business are projected to be flat or lower. Under the leadership of CEO Wael Sawan, who assumed the role in January, Shell is refocusing on its core oil and gas business to enhance investor returns and bridge the valuation gap with its US peers. While this strategic shift has caused concerns among some employees in the clean-energy division, it has been well-received by many investors. In conclusion, Shell anticipates improved earnings from gas trading in the third quarter, driven by Europe's robust demand for LNG. However, the chemicals and products unit is expected to show weaker performance, reflecting the challenges in the global economy. As Shell continues its realignment towards its core oil and gas business, the renewable and energy solutions segment faces flat or lower earnings. These developments highlight Shell's efforts to optimize its operations and deliver value to shareholders.

Implications of Shell's Q3 Earnings Forecast for New Businesses

Shell's Q3 earnings forecast, particularly the expected rebound in gas trading earnings, could have significant implications for new businesses in the energy sector. Europe's strong demand for LNG presents a lucrative opportunity for new businesses to tap into this market, especially those involved in LNG trading or related services. However, the scheduled maintenance affecting Shell's LNG production serves as a reminder of the operational challenges that new businesses may face in this sector.

Impact on Petrochemicals Sector

Shell's projection of weaker performance in its chemicals and products unit reflects the global economic challenges impacting the petrochemicals sector. This could be a cautionary note for new businesses considering entry into this sector, as they may need to brace for similar economic headwinds.

Renewable and Energy Solutions

Shell's strategic shift towards its core oil and gas business, resulting in flat or lower earnings for its renewable and energy solutions business, could influence new businesses' investment decisions. While this move has been well-received by investors, it may cause some apprehension among new businesses in the clean energy sector, who may perceive it as a lack of commitment to renewable energy. In conclusion, Shell's Q3 earnings forecast highlights the dynamic nature of the energy sector and the need for new businesses to stay agile and responsive to market trends and shifts in corporate strategy.
Story First Published at: https://financialpost.com/pmn/business-pmn/shell-sees-better-earnings-from-gas-trading-in-third-quarter
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