JP Morgan favours Shell and BP over TotalEnergies as Middle East tensions keep oil markets on edge

Oil prices surged 3.8% to $104/barrel due to Middle East tensions and a US hurricane threat, impacting production. Reports suggest potential US strikes on Iran, raising supply concerns. Shell and Chevron halted Gulf of Mexico production. Maersk increased fuel surcharges, fueling inflation fears and bond market sell-offs.

Shell Canada has approved Phase 2 of its LNG Canada project, doubling production capacity to 28 mtpa. The expansion includes new LNG trains, storage tanks, and pipeline upgrades. JGC and Fluor will provide engineering and construction services. Shell aims to supply LNG to Asian markets, with operations starting in the early 2030s.

Shell reported record Q3 refining margins of $42/barrel, up from $24 in Q2, driven by Middle East tensions. It raised its integrated gas production outlook to 740,000–780,000 barrels/day, including ARC Resources' output. LNG production is expected at 7.2M–7.6M tonnes. RBC analysts noted strong cash flow. Lower Rhine River levels impacted refinery utilization.

Oil prices rose on Thursday due to Middle East shipping attacks and U.S. Gulf Coast disruptions. Brent crude climbed 3.9% to $104.07, WTI increased 3.7% to $91.53. Iran's attacks on tankers in the Strait of Hormuz and U.S. Gulf Coast weather disruptions contributed to the surge. Major oil companies like BP, Chevron, and Shell may face production disruptions. U.S. crude inventories fell 3.2 million barrels last week, defying expectations.

Shell updated its third-quarter 2026 gas production forecast to 740,000-780,000 barrels of oil equivalent per day, up from 570,000-630,000. The increase is due to new assets, including ARC Resources. Shell also adjusted upstream and LNG forecasts. Refining margins are expected to improve to $42 per barrel, while chemical margins may decline.

An investigation found BP missed opportunities to prevent the deaths of two brothers at its Ohio refinery. The report, by the U.S. Chemical Safety Board, cited safety lapses. BP has not yet publicly responded to the findings.