Very early this morning, Shell (NYSE:SHEL) released a third-quarter 2022 “update note.” There were plenty of numbers, but not much commentary. However, a Wall Street Journal article effectively filled in the blanks. It articulated what many traders were probably thinking: A volatile natural gas market is likely to cause problems for Shell. Consequently, SHEL stock sank quickly today.
Shell is based in London, and the company is subject to a U.K. commodities market that is markedly different from the U.S. market. Due to Russia stifling natural gas exports to the U.K., it’s undoubtedly a challenge for Shell to cost-effectively source natural gas.
Producing crude oil won’t be quite as much of a problem. Shell expects to have produced 890,000 to 940,000 barrels of oil equivalent per day in Q3. On the other hand, the company expects its liquefied natural gas, or LNG, liquefaction volumes to have been between 6.9 million and 7.5 million tonnes. Clearly, today’s financial traders weren’t too impressed with that range.
What’s Happening with SHEL Stock?
SHEL stock tanked 5% right out of the gate this morning. An hour into the trading session, the shares will still down by 4%.
It certainly didn’t help that the stock market was generally in the red. Still, the Q3 update and the Journal’s article must have put Shell’s shareholders in a jittery mood.
There are also concerns about Shell’s third-quarter margins. For instance, in the Chemicals and Products category, Shell’s indicative refining margin is $15 per barrel of oil. In 2022’s second quarter, the company’s margin in this category was $28 per barrel of oil.
Moreover, this is expected to dent Shell’s bottom line. Specifically, the aforementioned “decrease in margin is expected to have a negative impact of between $1.0 and $1.4 billion on the third quarter Adjusted EBITDA for Products compared to the second quarter 2022.”
Today’s financial traders quickly mulled all of this info and promptly sold SHEL stock. Over time, investors in Shell and energy companies generally will have to contend with a difficult, unpredictable European commodities landscape.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
