Shell Shares Drop on Warning of Q4 Chemicals Loss, Weaker Gas Trading
The energy giant's update signals a sharp downturn in its chemicals and liquefied natural gas trading arms, raising concerns ahead of its full-year earnings report.
Shares of Shell PLC (NYSE: SHEL) fell on Thursday after the energy major warned of a significant loss in its chemicals division and a sharp slowdown in its typically powerful liquefied natural gas (LNG) trading results for the fourth quarter of 2025.
The London-based company’s stock slid 1.87% to $71.54 in morning trade after its latest update soured investor sentiment. The note, intended to guide market expectations ahead of full results on February 5, 2026, pointed to deteriorating margins and weaker trading performance compared to the prior quarter.
In the fourth-quarter update note released Thursday, Shell projected that adjusted earnings for its Chemicals and Products segment would be below break-even. The company specified that its Chemicals sub-segment is expected to post a "significant loss" for the period. Indicative chemical margins fell to $140 per tonne, down from $160 in the third quarter, reflecting a challenging global market plagued by oversupply and tepid demand.
Further pressure came from the company's Integrated Gas division, a key profit driver. While Shell had previously benefited from extreme price volatility, it now expects trading and optimization results to be "significantly lower" than in a strong third quarter. The normalization of energy markets and the impact of expiring hedging contracts have tempered the exceptional gains seen in previous periods.
Analysts were quick to weigh in on the downbeat forecast. RBC Capital Markets described the update as "negative", pointing to widespread weakness and subdued trading across oil, gas, and power. Analysts at Jefferies echoed the sentiment, calling the Q4 preview a "small negative" and highlighting the pressures in chemicals as a primary concern. The bank estimated the guidance could lead to a roughly 10% negative revision to consensus net income estimates for the quarter.
The update from Shell underscores the persistent challenges in the global chemical industry, which has struggled with sluggish economic activity, particularly in China. The segment's expected loss for Shell is a stark reminder of the cyclical nature of the business and its current position at the bottom of that cycle.
Beyond the operational advisories, Shell also flagged a non-cash deferred tax adjustment of approximately $0.3 billion in a joint venture, which is expected to negatively impact its Marketing and Chemicals adjusted earnings. The company also anticipates a working capital outflow of up to $3.0 billion, a reversal from the $4.1 billion inflow seen in the third quarter.
Despite the headwinds, some parts of the business remain robust. Shell guided that production in its core Upstream division would be between 1,840 and 1,940 thousand barrels of oil equivalent per day (kboe/d). LNG liquefaction volumes are forecast to be healthy, ranging from 7.5 to 7.9 million tonnes.
The guidance comes as CEO Wael Sawan continues to execute a strategy focused on enhancing investor returns through disciplined capital spending and a focus on the most profitable ventures, primarily in oil and gas. Investors will be closely watching the full earnings report next month to see how this weaker quarter impacts the company’s ambitious share buyback and dividend programs. Even with Thursday's dip, Shell's stock remains up significantly from its 52-week low of $56.81, though it is trading below its high of $76.74.