Shell on Wednesday gave an early glance into the whiplash effect of the US-Israeli war on Iran on oil majors' earnings, cutting its first-quarter gas production outlook while signalling a surge in oil trading profit and a dent to short-term liquidity.
Global benchmark Brent crude oil prices jumped in the first quarter to multi-year highs near $120 per barrel after the strikes on Iran in late February followed by Iran shutting the Strait of Hormuz and attacking its Persian Gulf neighbours.
Shell's working capital, a measure of short-term liquidity, is expected to swing to between minus $10 billion and minus $15 billion, reflecting unprecedented commodity price volatility hitting inventory, it said in a quarterly trading update. The British oil major expects working capital moves to reverse over time if oil and gas prices decline.
"Shell is expected to report a monster working capital build of $10-15bn (billion), highlighting how unprecedented the current commodity price environment is," said a note from RBC Capital Markets.
"Given its strong balance sheet, we expect investors to look through this."
Trading results in its chemicals and products business, which includes Shell's oil trading desk, are expected to be "significantly higher" than in the previous quarter, similar to adjusted earnings in its marketing arm, which includes petrol stations.
Shell's first-quarter integrated gas production was expected to be about 880,000 to 920,000 barrels of oil equivalent per day, the company said. It previously expected 920,000 to 980,000 boed. In the fourth quarter of 2025, it produced 948,000 boed.
Shell's first-quarter LNG production was expected to be about 7.6 million to eight million tonnes, the company said, adding that the figure reflected the ramp-up of LNG Canada but was offset by weather constraints in Australia and Qatar LNG outages. It previously forecast 7.4 million to eight million tonnes. In the fourth quarter of 2025, it liquefied 7.8 million tonnes.
Production at Shell's Pearl gas-to-liquids facility in Qatar stopped in mid-March after an attack on the Ras Laffan Industrial City damaged the facility, Shell said at the time.
Pearl GTL, a two-train facility that can process up to 1.6 billion cubic feet per day of wellhead gas, converting it into 140,000 bpd of gas-to-liquids, sustained damage on one the trains in the attacks, Shell has said.
Full repair of its train two would take around a year, Shell said at the time.
Net debt on a non-cash basis is expected to increase by $3 billion to $4 billion due to variable components of long-term shipping leases in the current macro environment.
Shell's net debt for the fourth quarter 2025 was $45.7 billion, and its gearing, or debt-to-equity ratio including leases, stood at 17.7 per cent, below the 20 per cent level Shell previously described as "comfortable."
Shell forecast adjusted earnings for its renewables and energy solutions unit to be around $200 million to $700 million, from $131 million in the fourth quarter, and trading in the unit to be significantly higher.
Brent crude prices averaged around $78.38 a barrel over January to March, compared with $63.08 in the fourth quarter and $74.98 a barrel during the same time last year.
(Reporting by Stephanie Kelly and Shadia Nasralla Editing by Bernadette Baum)
