London: Shell is expecting a significant improvement in its refining performance for the third quarter, with stronger margins providing a major boost to the company’s downstream business amid continued volatility across global energy markets.

The energy giant has indicated that its indicative refining margin could rise to around $42 per barrel, compared with approximately $24 per barrel in the previous quarter. The sharp increase highlights how rapidly conditions in the global refining industry can change as fuel demand, crude availability and geopolitical developments influence prices.

Refining margins represent the difference between the value of petroleum products produced by a refinery and the cost of the crude oil used to make them. Stronger margins generally improve profitability for companies operating large refining networks.

The expected improvement comes against a backdrop of heightened uncertainty in global energy markets. Geopolitical tensions and disruptions affecting important shipping routes have increased concerns about the availability and movement of crude oil and refined fuels.

Higher margins can provide Shell with additional financial strength at a time when energy companies are managing substantial investment requirements. The company operates across several parts of the energy industry, including oil and gas production, refining, chemicals and fuel distribution.

The refining business can experience substantial swings in profitability. Margins may rise when demand for gasoline, diesel, jet fuel and other petroleum products strengthens or when refinery capacity becomes constrained.

Conversely, weaker demand or an oversupply of refined products can rapidly reduce margins. This makes refining earnings particularly sensitive to changes in global economic activity and energy consumption.

Shell’s latest outlook also reflects the continuing importance of gas and liquefied natural gas within the company’s business. The company has separately adjusted its expectations for gas production, showing how different segments of the energy market can move in different directions.

The improvement in refining margins could also influence expectations for Shell’s upcoming financial results. Investors typically watch refining performance closely because it can have a significant effect on quarterly earnings and cash generation.

The broader energy industry is currently facing several competing forces. Oil prices have been affected by geopolitical risks, while governments and businesses continue to invest in lower-carbon energy technologies.

At the same time, global demand for conventional fuels remains substantial. Aviation, road transportation, manufacturing and other industries continue to depend heavily on petroleum products.

For Shell, maintaining profitable operations while adapting to changes in the global energy system remains a major strategic challenge. Strong refining margins can provide short-term support, but energy-market conditions can change rapidly.

Investors will now be watching Shell’s full quarterly results for further information about refining profitability, oil and gas production, cash flow and the company’s broader financial performance.

The latest margin outlook suggests that refining has become a particularly important source of earnings support for Shell during the quarter, although the company remains exposed to the wider volatility affecting global energy markets.