Shell set for Q1 return to upstream profit, improved refining margins

London, (Quantum Commodity Intelligence) - Royal Dutch Shell is expecting to report a return to profitability for its upstream business for the first quarter, the first time this has been achieved in over a year, while refining margins are set to rise slightly, it said in a statement released Wednesday.

The company's upstream business has suffered a large hit in the last 12 months, with adjusted losses for the second half of 2020 coming in at $4.248 billion.

Upstream "adjusted Earnings are expected to be positive in the first quarter 2021, capturing the upside from the current commodity price environment," said the Q1 preview statement.

Upstream production volumes were expected to come in at 2.4-2.475 million barrels of oil equivalent per day (moe/d), up from 2.371 million barrels in Q4 and an average of 2.424 million barrels for the entirety of 2020.

The increase was likely related to an easing of OPEC+ production caps starting this year.

Meanwhile, Shell said its indicative refining margin for Q1 is around $2.6/bbl, up from $1.6/bbl in Q4 last year.

Its first-quarter refined products sales will be lower compared with Q4 however, at 3.7-4.7 million barrels per day down from 4,781 b/day for the final three months last year, likely due to a return to Covid related lockdowns in its key marketing regions.

"Marketing results are expected to be higher compared with the fourth quarter 2020, as higher margins and lower costs are more than offsetting lower sales volumes," said the company.

Trading and optimisation results are also expected to be "average and higher than the fourth quarter 2020."