Shell forecasts sharp rise in refinery margins as war-damaged plants tighten fuel supplies

Shell has forecast that its refinery profit margins will rise sharply in the July-to-September period, as shutdowns at war-damaged refineries in the Middle East and Russia squeeze global fuel supplies. The company said margins are expected to reach $42 a barrel, almost double the $24 a barrel recorded in the second quarter. That would also exceed the previous high of about $28 a barrel seen in mid-2022.

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The forecast was set out in a market trading update on Wednesday. Shell said the increase reflects a steep rise in the price of refined fuels, including diesel, relative to the cost of crude oil. The company said shortages around the world have pushed up prices, with the diesel premium over the global oil benchmark rising above $100 a barrel for the first time.

Brent crude averaged $85.60 a barrel in the third quarter, down from $97.05 in the second quarter, but still well above the $68.14 average in the same period last year. The margin outlook comes after Shell reported profit of almost $10bn for the second quarter of 2026, more than double the figure for the same period last year and its second-highest quarterly earnings on record. The company's market value also reached a record high of £36.23 a share at the end of last month.

Those gains came despite oil prices easing from a 2026 peak of above $115 a barrel in the spring, as European gas prices doubled from a year earlier over the summer and diesel prices hit record levels. The figures underline how disruptions to refining capacity can affect fuel markets even when crude prices are lower than earlier in the year. Shell is one of Europe's largest refiners, and the company's results are closely watched because they can signal wider trends in fuel pricing and margins across the sector.

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The latest forecast also points to the continuing effect of conflict-related damage on energy infrastructure, with refineries in the Middle East and Russia among those said to be affecting supply. The update also highlights the role of integrated oil and gas companies in periods of market stress. Shell's refining business has benefited from the gap between crude prices and the cost of finished fuels, particularly diesel.

In the same period, another major European energy company said integrated operations were helping it take advantage of the global energy crisis, describing refineries that were once seen as liabilities as becoming highly profitable. What remains unclear is how long the current margin strength will last, and whether fuel prices will stay elevated if more refining capacity returns to service. The company's forecast covers the July-to-September period, but it did not give a longer-term outlook in the material provided.

Investors and fuel markets will be watching for further trading updates, as well as any signs of additional disruption to refineries in the Middle East and Russia.

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