The shock wave of the collapse in oil prices has surfaced! Shell (SHEL.US) predicts “significant deterioration” in Q4 oil trading business, and the chemical sector is mired in huge losses

The Zhitong Finance App learned that Shell Group (SHEL.US) said that due to falling crude oil prices, its oil trading performance in the fourth quarter deteriorated significantly.

Ahead of the earnings report scheduled to be released early next month, Shell said in a trading update report on Thursday that oil trading results for the fourth quarter “are expected to decline significantly” compared to the previous three months. In the company's struggling chemical division, “significant losses” are expected, and this quarter's results will fall below the break-even point.

This update comes at a time when the oil market is in an oversupply situation, which may present a more challenging trading environment in the coming months. Last year, the price of Brent crude oil, the international benchmark, plummeted 18%, and was largely unaffected by the turbulent situation in Venezuela — the country's president, Nicolas Maduro, was captured by the US military.

Shell's vast internal trading business involves oil, gas, fuels, chemicals, and renewable energy — trading both the company's own products and supplies from third parties. The energy giant did not separately disclose the performance of its trading business, but its performance attracted attention because it was a key driver of profits.

Strong trading performance in the third quarter was one of the factors that Shell cited as a driver of earnings exceeding expectations. CEO Wael Savan has been working to cut costs and divest underperforming assets to improve the company's balance sheet.

Shell stock ranked second among the top five global oil giants last year, after ExxonMobil, but the increase gradually subsided after peaking in mid-November, with an increase of less than 11% at the end of the year.

Adding to the uncertainty, traders are still weighing the subsequent impact of America's capture of Venezuelan leader Nicolas Maduro over the weekend on the wider market.

Shell has been preparing to resume initial work on Venezuela's offshore gas fields in the third quarter of 2025 to supply gas to neighboring Trinidad and Tobago. At the time, Shell was increasingly confident that the Trump administration would issue new licenses and exempt the project from sanctions.

The US has now said it has taken control of Venezuela's oil industry and said that US companies will invest billions of dollars in the country.

In terms of natural gas, Shell expects this quarter's trading results to be the same as the previous period.

Shell is the world's largest liquefied natural gas (LNG) trader and strengthened its position with the launch of a major terminal costing $29 billion in 2025. The “Canadian LNG Canada Project” (LNG Canada) was put into operation last summer, and production continues to increase. The company predicts that global demand will grow by around 60% by 2040.

Meanwhile, Shell challenged its loss in an arbitration case against US liquefied natural gas exporter Venture Global Inc., in November, after British Petroleum won a similar case. In August of this year, the arbitral tribunal ruled in favor of Venture Global in a dispute relating to the company's failure to deliver LNG cargo from a Louisiana plant to Shell under a long-term contract. A few weeks later, Venture Global lost a similar dispute with British Petroleum.

Shell saw a slight increase in oil and gas production this quarter, including production from Adura North Sea, its new joint venture with Equinor ASA.