Shell adjusts gas production guidance down due to Middle East conflict impact
Shell on Tuesday raised its second-quarter gas production forecast and said gas trading would be significantly stronger than in the previous quarter, helping offset disruptions linked to conflict in the Middle East.
Objective Facts
On July 7, 2026, Shell raised its second-quarter gas production forecast and said gas trading would be significantly stronger than in the previous quarter, helping offset disruptions linked to conflict in the Middle East. Shell said output from its integrated gas division is expected to be 610,000 to 650,000 barrels of oil equivalent per day in the April to June quarter, down sharply from 909,000 boed in the first quarter. The drop is mainly due to the shutdown of Shell's Pearl GTL facility in Qatar following an attack related to the Middle East conflict. The updated guidance follows a period of heightened volatility in global energy markets after conflict in the Middle East disrupted LNG exports through the Strait of Hormuz and reduced Qatari supply. Major oil companies have benefited from heightened energy-market volatility as the U.S.-Israeli conflict with Iran triggered sharp swings in crude oil and natural gas prices, boosting trading returns at companies including Shell, BP and TotalEnergies. Regional outlets emphasize the broader implications for global LNG markets and energy security, particularly for Asia and Europe's dependence on Qatari gas supply.
Deep Dive
Prior to the attack on March 18, 2026, Pearl GTL was producing at reduced rates with exports constrained by the Strait of Hormuz blockage, and production from the full facility has now ceased to enable assessment of damage. Shell's adjusted earnings rose to a two-year high of $6.9 billion in the first quarter, beating estimates and benefiting from gains linked to the Middle East war, and the company subsequently raised its dividend by 5%. The mismatch between production losses and trading gains reflects the volatile, bifurcated nature of energy markets during the conflict: physical infrastructure damage cuts output, but price swings from geopolitical risk create significant trading profits for integrated majors positioned to exploit volatility. Market analyst Chris Beauchamp from IG noted that "While Shell can revel in the boost to refining margins and the bounty delivered by an inflow of working capital, it also has to suffer through the loss of production thanks to a hit to Qatari volumes." Shell's revised guidance reflects management's attempt to balance pessimism about physical production (down 30% from Q1) with optimism about trading and chemicals margins in a high-volatility environment. Shell said its full-year price and margin sensitivities may not reflect realized quarterly margins because of ongoing market disruptions. This caveat signals that near-term earnings benefits from volatility may not persist, and guidance carries elevated uncertainty. Looking ahead, the key question is repair timelines at Pearl GTL. The extended repair time for unit 2 raises questions about supply chain continuity and the consequences for the global market for gas-derived products, and the event underscores the vulnerability of energy infrastructure in geopolitically sensitive areas and anticipates strategic adjustments in both production and export contracts. Full Q2 results are scheduled for July 30, 2026, and analyst consensus is due July 22, 2026. The durability of Shell's trading advantage depends on how long the Middle East conflict remains unresolved and energy markets remain volatile.
Regional Perspective
Most LNG from Qatar and the UAE goes to Asia, with almost 90% of the total volumes exported via the Strait of Hormuz destined for the Asian market in 2025, accounting for more than a quarter of the region's total LNG imports, with just over 10% going to Europe. One-quarter of global LNG export capacity is offline as of early April, with Ras Laffan, which accounts for nearly 20% of global output, closed, with two of 14 trains damaged. Regional energy agencies and Middle East outlets frame Shell's production cuts as part of a broader structural vulnerability in global LNG supply, exacerbated by Strait of Hormuz blockades and concentrated production in a geopolitically volatile zone. While new liquefaction projects in other regions are expected to offset Qatar's losses over time, the impacts of these disruptions could be felt through 2026 and 2027, and governments have catalogued actions to curb demand and support consumers in response to the energy market impacts of the conflict. The conflict has been described as the "end of the narrative" that the Gulf is a permanently safe destination for expatriates, immigrants, and tourists; the Qatar-funded Middle East Council on Global Affairs suggested the war has "irreversibly shaken" the region's image, exposing a deep-seated fragility beneath the facade of the Gulf's rapid economic transformation. While Europe has decreased its dependency on Qatari LNG in recent years due to disruptions in the Red Sea, the market share of U.S. LNG has increased significantly, with the U.S. accounting for 63% of Europe's LNG imports in Q1 2026, up from 57% in Q1 2025, and if the Middle East conflict continues to disrupt LNG shipments from Qatar, the U.S. could supply two-thirds of Europe's LNG imports in 2026 and 80% by 2028.