Shell's Q1 Outlook: Trading Windfall Offsets Geopolitical Production Hit

Shell's Q1 2026 update shows refining & trading profits surging on market volatility, offsetting lower gas output from Middle East conflict. Analysts raise EPS & EBITDA forecasts.

Ahead of its full first-quarter results on May 7, energy giant Shell has provided a trading update that paints a picture of resilience amid disruption. While geopolitical conflict in the Middle East is pressuring gas output, the resulting market volatility is fueling a significant windfall in its trading and refining divisions.

The company's integrated gas production is now forecast between 880,000 and 920,000 barrels of oil equivalent per day (kboe/d) for Q1 2026, a reduction from the 948 kboe/d achieved in the previous quarter. This downgrade is directly linked to damage at the Qatari Pearl Gas facility caused by regional conflict. However, Shell is partially compensating for this shortfall through its LNG Canada project, where liquefaction volumes are estimated between 7.6 and 8.0 million tonnes, supported by the ramp-up of Train 2 which began production in November 2025.

Simultaneously, the very geopolitical tensions hampering production are boosting other segments. The closure of the Strait of Hormuz has driven oil trading margins higher. More strikingly, Shell has raised its indicative refining margin for the quarter to $17 per barrel, a substantial increase from the $14 seen in Q4 2025. Refinery utilization is expected to be robust, between 95% and 99%. Marketing earnings are also anticipated to be significantly above the level of Q1 2025.

In response to this update, analysts at Piper Sandler have raised their Q1 2026 estimates. They now forecast earnings per share of $2.36 and EBITDA of $17.1 billion, up from previous projections of $2.17 and $16.1 billion. The firm maintains its Overweight rating and $106 price target on Shell shares. A key topic for the upcoming earnings call will be the duration of the Middle East disruptions and whether the integrated gas business can capitalize on current market tightness.

On the strategic front, Shell is advancing its European gas supply strategy. In February 2026, it signed a memorandum of understanding with Greek conglomerate METLEN for the annual delivery of 0.5 to 1.0 billion cubic meters of gas from 2027 through 2031. This deal will utilize Greek regasification terminals, providing access to wider European markets via the Vertical Gas Corridor and positioning Greece as a hub for non-Russian gas.

Financially, the company continues its aggressive capital return program. On April 8 alone, Shell repurchased approximately 4.45 million of its own shares across trading venues in London and Amsterdam. Its authorized share buyback volume for the first quarter stands at $3.5 billion, with the current program running until May 1, 2026. Offsetting some of this cash deployment, Shell expects a $3 to $4 billion increase in non-cash net debt due to variable components in shipping lease contracts within the current market environment.

Shell's stock has performed strongly, gaining about 23% since the start of the year and trading just shy of its 52-week high. It currently stands roughly 46% above its 52-week low from April 2025. The analyst consensus, set to be published on April 29, currently stands at a "Moderate Buy" rating with an average price target of $93.19.