Shell said it expected to revise upwards the value of its oil and gas assets after the group raised its long-term outlook for commodity prices due to increased demand and the disruption to energy flows driven by Russia’s invasion of Ukraine.
Europe’s biggest oil and gas group increased its assumed 2023 price for Brent crude, Europe’s benchmark, to $80 a barrel and said it would reverse up to $4.5bn in writedowns previously taken on the value of its oil and gas assets.
“In the second quarter 2022, Shell has revised its mid and long-term oil and gas commodity prices reflecting the current macroeconomic environment as well as updated energy market demand and supply fundamentals,” Shell said in a trading update ahead of its half-year results on July 28.
Refining margins in the second quarter had almost tripled, Shell said, to $28.04 a barrel from $10.23 in the first three months of the year. The increase, driven by a global refinery capacity shortage and exacerbated by restrictions on exports of Russian products following the invasion, would boost earnings by between $800mn and $1.2bn, the oil major said.
Shell expects oil trading results to be higher in the second quarter than in the first three months of the year, while the group predicts earnings from gas trading will be lower than the “outstanding” performance in the first quarter.
Shares in the oil group rose 2.3 per cent in early London trading on Thursday, pushing up their gains for the past 12 months to 38 per cent.