Shell warns of Q1 gas drop, liquidity hit but sees oil trading boost

British energy giant Shell said on Wednesday it expects weaker first-quarter gas production and a sizable short-term hit to liquidity due to the fallout from the conflict involving Iran, while stronger oil trading is likely to partly cushion earnings.

In a first-quarter update ahead of its May 7 results, Shell said sharp volatility in oil and gas markets caused large swings in inventory values, pushing working capital to between negative $10 billion and negative $15 billion during the quarter. The company said those movements should reverse over time if commodity prices ease.

Shell also lowered its integrated gas production guidance for the quarter to 880,000-920,000 barrels of oil equivalent per day, down from 948,000 boe/d in the previous quarter, citing disruption in the Middle East.

LNG output, however, is expected to remain broadly in line with earlier guidance, with additional volumes from Canada helping offset part of the regional impact.

The update provides an early view of how the conflict is reshaping earnings outlooks for major oil and gas companies.

Brent crude surged to nearly $120 a barrel during the quarter as attacks and supply disruptions rattled markets, creating conditions that benefited oil trading desks even as upstream operations and balance-sheet items came under pressure.