Shares in Shell dropped on Monday as it warned that weaker gas trading will hit profits, writes Jessica Clark.
The oil major, which has sought to play down talk that it is plotting a takeover of BP, saw its share price fall as much as three per cent after the "disappointing" update.
The stock eventually closed down 2.9 per cent, or 75 pence, at 2553p.
Shell will reveal its second-quarter results on July 31, when chief executive Wael Sawan will likely face questions from investors over speculation of a mega-merger with its London-listed rival.
Analysts at RBC downgraded their forecast for Shell’s second-quarter profit to £2.6 billion from £3.5bn and Citi cut its expectations from £4.6bn to £3bn.
Biraj Borkhataria, head of global energy transition research at RBC, said: "This is a disappointing update from Shell and we expect it to weigh on the shares in the near-term.
"That said, just like one quarter did not make a positive trend, we do not expect this to alter the longer-term thesis, although it does show how levered the company is to trading volatility."
Victoria Scholar, head of investment at Interactive Investor, said the company’s shares took a hit "as investors price in a weaker-than-expected set of quarterly earnings on July 31".
She said the group had been "caught up in the oil market frenzy this year" amid conflict in the Middle East and moves by the Opec oil cartel to increase supply.
She said: "The prospect of higher supply is likely to continue to keep a lid on prices. There are concerns about a supply surplus which could push prices even lower, particularly if global demand weakens on top."
Shell adjusted its forecast for its integrated gas division from between 890,000 to 950,000 barrels of oil equivalent per day (boed) to between 900,000 to 940,000 boed for the second quarter.
The energy giant warned that trading would be "significantly lower" than the first quarter of the year, when the division produced 927,000 boed.
And the company reduced the top-end of its expectations for liquefied natural gas production from 6.9 million tonnes to 6.8m tonnes.
In its oil-focused upstream division, Shell said it expects output of 1.66m to 1.76m barrels of oil equivalent per day, up from a previous forecast of 1.56m to 1.76m.
(Pic: Getty Images)
