The oil sector is in the spotlight following Shell’s surge in margins and the rise in crude oil prices

(Il Sole 24 Ore Radiocor) – Oil stocks saw a buying spree in Milan and across Europe, driven by rising oil prices and the outlook for the Anglo-Dutch industry giant Shell, which forecasts record refining margins for the third quarter. Amid a session of widespread selling, the sector is also being buoyed by rising oil prices, with Brent crude back above the $101 mark ($101.5, up 1 per cent), whilst fresh Iranian attacks on ships in the Persian Gulf and Houthi attacks on infrastructure in Saudi Arabia are fuelling tensions.

Turning back to Shell, the market is focusing on one figure: the group is forecasting margins of $42 per barrel, a record level and significantly higher than the $24 per barrel recorded in the previous quarter. The share price is performing well in London, whilst BP is also rising. Oil shares are also in the spotlight in Milan:Saipem, Eni and Tenaris.

“Shell’s continued strong performance in the oil and gas sector should be seen as a positive sign for other major energy companies as well,” write analysts at JPMorgan. Shell forecasts an increase in production from its Integrated Gas unit to 740,000–780,000 barrels of oil equivalent per day in the third quarter, compared with 631,000 boe/d in the second, whilst LNG liquefaction volumes are expected to be 7.2–7.6 million tonnes, compared with 7.7 million in the previous quarter.

Underlying operating expenses (opex) are estimated at $1.3–1.5 billion, compared with $1.2 billion in the second quarter, and pre-tax depreciation and amortisation at $1.1–1.5 billion, compared with $1.2 billion. The Trading & Optimisation segment is expected to be in line with the previous quarter. In the Upstream segment, production is estimated at 1.735–1.835 million boe/g, compared with 1.824 million in the second quarter, with underlying opex of $2.1–2.5 billion compared with $2.2 billion, and pre-tax depreciation and amortisation of $2.2–2.8 billion compared with $2.5 billion in the previous quarter. Refinery utilisation is estimated at 93–97 per cent, down from 102 per cent, with low water levels in the River Rhine affecting utilisation at the Rheinland refinery.