Shell Refineries Set for Record Refining Profits

Published: 07 October 2026. The English Chronicle Desk. The English Chronicle Online

Shell is expecting its refineries to generate almost twice as much profit from each barrel of fuel produced during the third quarter of 2026, as severe supply shortages and disruptions to refining capacity drive fuel prices to unprecedented levels.

The energy giant has forecast refining margins of around $42 a barrel for the period from July to September, a dramatic increase from the $24 a barrel recorded during the second quarter. The projected figure would also represent Shell’s strongest refining margin in years, significantly exceeding the previous high of about $28 a barrel reached in the middle of 2022.

The sharp rise highlights how geopolitical instability and damage to major energy infrastructure are reshaping global fuel markets. Refinery shutdowns in parts of the Middle East and Russia have reduced the amount of crude oil that can be processed into usable fuels, tightening supplies of products such as diesel and pushing prices higher.

For major integrated oil companies such as Shell, the disruption has created a complicated market environment. Crude oil prices have eased from their 2026 peak, but the cost of refined products has continued to climb. The widening gap between the price of finished fuels and the cost of crude has therefore allowed refineries to capture unusually high margins.

Shell’s latest trading update comes after an exceptionally strong second quarter for the company. The group reported almost $10bn in profit for the three months to June, more than twice its earnings in the same period a year earlier. It was also Shell’s second-highest quarterly earnings result on record, reflecting the extraordinary conditions affecting international energy markets.

The company’s performance has also been reflected in its share price. Shell became the second-largest company in the FTSE 100 by market value, with its shares reaching a record £36.23 at the end of September. Investors have continued to place confidence in the company despite fluctuations in the underlying oil market, partly because of the strength of its refining and gas operations.

The movement in oil prices provides an important explanation for the unusually strong refining outlook. Brent crude, the main international benchmark, averaged about $85.60 a barrel during the third quarter, down from an average of $97.05 in the second quarter. However, the third-quarter average remained substantially higher than the $68.14 recorded during the same period last year.

While crude prices have declined from their spring peak of more than $115 a barrel, refined fuel prices have moved in the opposite direction. Diesel has been particularly affected, with its premium over the global oil benchmark rising above $100 a barrel for the first time. Such a gap is a powerful indication of how profitable it has become to turn crude oil into refined fuels in the current market.

The disruption is being felt particularly strongly across Europe, where refining capacity and energy supply have been placed under pressure by the wider geopolitical crisis. Shell operates some of the continent’s largest refineries, giving the company significant exposure to the sharp increase in refining margins.

TotalEnergies, another major European energy company with substantial refining capacity, is experiencing similar conditions. Its chief executive, Patrick Pouyanné, described the situation as a major opportunity for integrated energy companies that can produce, refine and market fuels across different parts of the supply chain.

Speaking at an industry conference in London, Pouyanné said the crisis had transformed European refineries that were previously considered financial burdens into highly valuable assets. His comments illustrate how quickly the economics of refining can change when global supplies become constrained.

The energy crisis is not limited to oil and refined products. Natural gas prices have also surged across Europe, adding another source of pressure for households, businesses and industrial users. The continent’s benchmark gas price index rose to €70.50 per megawatt-hour in August, more than double the level recorded a year earlier.

Gas prices had already averaged more than €48 per megawatt-hour in the second quarter before increasing to almost €64 per megawatt-hour during the third quarter. The rise has added to concerns about energy costs and the wider impact of geopolitical disruptions on European economies.

Shell itself has been directly affected by the crisis. The conflict involving Iran caused severe damage to one of the company’s important gas-processing facilities in the Gulf. Before the disruption, Shell’s gas production had been around 900,000 barrels of oil equivalent per day. Damage to the facility reduced that output by approximately one-third.

Despite the disruption, Shell now expects its gas production during the third quarter to reach between 740,000 and 780,000 barrels of oil equivalent per day. That represents a substantial improvement over its previous forecast of between 570,000 and 630,000 barrels of oil equivalent per day.

The revised forecast is also above Shell’s second-quarter production level of approximately 631,000 barrels of oil equivalent per day. The increase suggests that the company has been able to restore a significant portion of its production capacity despite continuing geopolitical uncertainty.

The contrasting movements in crude oil, refined fuels and natural gas demonstrate the increasingly complex nature of the global energy market. Oil companies are not simply responding to a single commodity price. Their financial performance is being shaped by the availability of refinery capacity, regional fuel demand, infrastructure damage, transportation risks and the cost of natural gas.

For consumers, however, record refining margins can have an uncomfortable consequence. When refined products become significantly more expensive relative to crude oil, higher costs can filter through to petrol, diesel and other fuels. Diesel prices are particularly important because the fuel is widely used in freight transport, agriculture, construction and industry. Sustained increases can therefore affect the cost of transporting goods and ultimately place additional pressure on consumer prices.

The situation also raises questions about Europe’s longer-term energy resilience. Refinery closures or prolonged outages in major producing regions can leave markets more dependent on a smaller number of operational facilities. Any further disruption could therefore create additional price volatility, particularly if demand remains strong.

For Shell and other integrated energy companies, the current environment demonstrates the financial value of maintaining operations across multiple parts of the energy chain. Weakness in one segment can sometimes be offset by strength in another. While crude prices have fallen from their earlier highs, refining margins and European gas prices have provided significant support to earnings.

Investors will now be watching closely to see whether the extraordinary refining margins can be sustained. The $42-a-barrel forecast is considerably above historical levels, and maintaining such profitability would depend on continued tightness in refined fuel supplies and elevated product prices.

At the same time, any restoration of damaged refineries, a reduction in geopolitical tensions or a significant increase in global refining capacity could narrow the gap between crude and refined fuel prices. That would reduce the exceptional margins currently benefiting companies such as Shell.

For now, however, the market remains heavily influenced by supply disruptions and geopolitical risk. Shell’s latest forecast shows just how dramatically those pressures have changed the economics of refining. What were once viewed as relatively low-return assets have suddenly become some of the most profitable parts of the energy business.

The development underscores a broader reality facing the global economy: energy infrastructure remains highly vulnerable to geopolitical shocks, and disruptions can quickly translate into major financial consequences. As governments and businesses prepare for continued uncertainty, the latest figures from Shell provide a clear indication that the energy crisis is creating both serious challenges for consumers and extraordinary opportunities for major producers.