Wedoany.com Report-Oct 30 , Over the last 12 months, the Shell (LSE:SHEL) share price has fallen around 7%. And the company is about to report its earnings for the third quarter of 2024.

It looks likely that profits are going to come in lower than they did a year ago. But with the stock already down, is the bad news priced in?

There are two reasons Shell’s earnings are expected to be weaker than they were in 2023. One is that things were exceptionally strong then and the other is that they’re more difficult now.

Earlier this week, BP reported its lowest quarterly profit since 2020. And the company identified weaker refining margins as a key reason for this.

It’s absolutely true that diesel and gasoline margins are lower than they were a year ago – and this is the same for Shell as it is for BP. But lower refining differentials aren’t the only issue.

BP also stated its trading revenues had normalised after an unusually strong Q3 2023. Shell also reported an impressive performance in its trading a year ago, so that’s also likely to be lower.

These factors mean I’m not expecting much in the way of positive surprises from Shell when it reports earnings on Thursday (31 October). But the bigger issue for the investors is the future.

In terms of refining margins, the outlook is somewhat mixed. While the gasoline differential is roughly where it was a year ago, the spread on diesel is still much lower.

As a result, I’m expecting weakness in refining margins to continue into Q4 of this year. And the outlook for oil prices more broadly is also challenging in the near term.

The supply side of the equation looks strong, while the demand side looks weak. Ultimately, that means prices are unlikely to rise until something changes.