Shell warns Iran conflict has ‘dug a gap’ of a billion barrels as its income hit highest for 2 years

The boss of Shell warned the Iran war has ‘dug a hole’ of a billion barrels in global oil supply and that ‘the journey back will be a long one’.

As the energy giant said profits have been boosted by the conflict, Shell’s Wael Sawan made clear the effects of the crisis would continue to reverberate even if peace breaks out.

A billion barrels have been lost to world supplies, when combining oil that cannot be shipped through the Strait of Hormuz and reduced production. 

Shell and rival BP have benefited from the surge in the price caused by the shortage.

Yesterday, Shell revealed a 24 per cent rise in profits to £5.1billion for the first quarter, its biggest haul for two years, and hiked its dividend by 5 per cent.

But it has been hit by damage to its Pearl gas unit in Qatar, which will cost ‘well below half a billion dollars’ to repair and take a year to return to service. 

Profits boom: Shell boss Wael Sawan, pictured, made clear the effects of the Iran War would continue to reverberate even if peace breaks out

And it cut its quarterly share buy-back programme from £2.6billion to £2.2billion to preserve cash amid a short-term squeeze. 

Meanwhile, Sawan noted that as oil price rises ripple through the global economy, demand is weakening in some places including the airline industry.

Hopes were growing last night that the US and Iran were edging towards a temporary deal to halt the war, sending the price of a barrel of Brent crude as low as $96 – but still ahead of the $72 at the start of the war.

Sawan said: ‘The hard facts are, we have dug ourselves a hole of close to a billion barrels of crude shortage, either because of locked-in barrels or unproduced barrels, and that hole is deepening every day.

‘The journey back will be a long one.’ That is beginning to have an impact on refineries, which turn crude into petrol, diesel or jet fuel, he said, adding: ‘We are seeing some demand curtailment [buying less] to the tune of 5 per cent in areas like jet, in the airline industry.

‘That’s the only thing you can expect people to do: drawing down on stocks, fuel switching or demand curtailment. 

We continue to see resilience in many parts of the world but the question will be: how will that pan out in the coming months? Too early to speculate on that.’

Profits at Shell’s chemicals and products unit, which includes refining and oil trading, were £1.4billion, four times higher than a year ago.

Shell’s oil and gas output fell 4 per cent from the previous quarter. It expects gas production to dip by up to 36 per cent in the next quarter.