Oil market slowdown to hit Shell cash flows

ROYAL Dutch Shell’s early earnings surge has slowed in recent months after the stuttering oil market recovery stemmed rising cash flows.

The price of Brent crude has slumped to an average of $4 a barrel below its multi-year highs at the start of the year, meaning the oil major is unlikely to top its first quarter triumph in its upcoming results this week. Equity analysts at HSBC have warned that Shell’s underlying cash flows could fall by more than $2bn (£1.5bn) from the first quarter’s $10.4bn to $8.3bn due to the recent fall in prices for oil and gas.

The Anglo-dutch energy giant is still expected to reveal strong year-on-year growth compared to early 2016 when the market first began to climb from the depths of its crash at $28 a barrel. However, the slowdown in free cash flow is still a blow for the company which has embarked on a cost-cutting drive and $30bn asset sale programme to chip away its heavy debt pile.

“We don’t expect cash flow to repeat the levels of the first quarter but disposals proceeds should be much bigger, allowing a further reduction in balance sheet gearing,” HSBC said in a statement.