Shell warns of sharp Q2 gas production drop on Qatar disruption
Shell's integrated gas output set to fall 30% quarter-on-quarter as Middle East conflict hits Qatari volumes, tightening European LNG supply ahead of the winter storage season.
Shell warned on Tuesday (2026-07-07) that its integrated gas production would fall sharply in the second quarter, with the oil major blaming disruption to Qatari volumes from the ongoing Middle East conflict.5
The company said output from the division would come in at 610 to 650 thousand barrels of oil equivalent per day in the April-to-June period, down from 909 kboe/d in the first quarter — a fall of roughly 30%. LNG liquefaction volumes are expected to reach 7.4 to 7.8 million tonnes, below the 7.9 million tonnes produced in the prior quarter.5
That drop matters for European gas markets because Qatar is among Europe's key LNG suppliers, and any sustained disruption arrives at a moment when the continent is already trying to rebuild depleted inventories ahead of next winter. ICE Endex TTF front-month gas was trading at €46.61 per megawatt hour on Tuesday (2026-07-07) morning, up 1.33% on the session, with the Shell announcement adding to existing tightness concerns.5
Gas transmission operators grouped under ENTSO-G had already flagged in May that European storage might only reach 76% of capacity by 1 October if global LNG supplies remained constrained by geopolitical risks in the Middle East — a level well below the European Commission's formal 90% target.2 As of 30 April, EU-wide inventories stood at around 32.7% of total capacity.3 The summer injection window is short, and losing even a fraction of Qatari export capacity complicates the arithmetic further.
Shell's warning extends beyond gas volumes. The company said it expected unprecedented commodity price volatility to produce a working capital inflow of between $1 billion and $6 billion in the second quarter, a sharp swing from the $11.2 billion outflow recorded in the first quarter.5 The range is unusually wide, signalling that Shell's own finance team has limited visibility on how the quarter closes — a reflection of how difficult physical commodity flows have become to model since the regional conflict escalated.
Downstream, Shell's refinery utilisation is expected to run at close to 100% in the second quarter, essentially unchanged from the 99% reported in the first quarter.5 That reading suggests the refining division has been largely insulated from Middle East disruption so far, even as the upstream and gas segments absorb the impact. Marketing sales volumes were guided at 2,550 to 2,650 thousand barrels per day, roughly in line with the 2,627 kb/d delivered in the prior quarter.5
The renewables and energy solutions unit faces greater uncertainty. Shell guided that division to a range spanning from a $0.3 billion loss to a $0.3 billion gain, compared with the $0.3 billion profit recorded in the first quarter.5 Corporate adjusted earnings were forecast at a loss of between $0.5 billion and $0.7 billion. The picture is of a company that has held its refining margins but lost ground in gas and power trading.
The Middle East disruption has already reshaped supply expectations more broadly. The EIA's Short-Term Energy Outlook published in May estimated that Iraq, Saudi Arabia, Kuwait, the UAE, Qatar and Bahrain had collectively shut in 10.5 million barrels per day of crude production, underscoring the scale of output lost across the region since the conflict intensified.4
For gas specifically, the channel linking Middle East disruption to European prices runs through LNG. Qatar accounts for a significant share of Atlantic basin shipments, and any sustained curtailment of its liquefaction output reduces the cargo count available for diversion towards Europe. The EIA projected US Lower-48 marketed gas production would grow 3% in 2026 compared with 2025, with Permian and Haynesville output leading the gain.1 But US LNG export capacity constrains how quickly that domestic surplus can substitute for Qatari volumes on the European market.
Shell is scheduled to report full second-quarter results in the coming weeks. The actual LNG liquefaction figure — and whether it lands at the low end or high end of the 7.4 to 7.8 million tonne range — will be the number European gas analysts watch most closely as they calibrate how tight the injection season becomes before the October storage deadline.