Totalenergies Expects Continued Refining Weakness, Lower Hydrocarbon Production

TotalEnergies TTE 0.76%increase; green up pointing triangle said continued pressure on refining margins would take a toll on its downstream results for the third quarter, while hydrocarbon production would decline slightly from the previous quarter.

The French energy major joined U.K. peers Shell and BP in warning of lower refining margins for the third quarter as the industry grapples with concerns about a global slowdown in demand for refined oil products.

TotalEnergies’ update came as the International Energy Agency trimmed Tuesday its forecast for this year’s oil-demand growth for the third month in a row, a day after the Organization of the Petroleum Exporting Countries cut its own demand projection. An economic slowdown in China—the world’s top crude importer—stoked concerns about fuel demand.

Results in TotalEnergies’ downstream division are expected to fall sharply on lower refining margins, it said. The company’s European refining margin marker dropped to $15.4 a ton in the third quarter from $44.9 a ton the prior quarter and $100.6 a ton the year before.

TotalEnergies reported an adjusted net operating income of $1.0 billion for its downstream division in the second quarter, down 30% on year, and cautioned that refining margins would remain under pressure due to low diesel demand in Europe and market normalization following the disruption in Russian supply.

In early October, BP said a drop in its refining margins would see it take a $400 million to $600 million hit to its profits in the third quarter, while Shell said it expects its refining margin to continue to drag on its results in the third quarter.

Ahead of the companies’ trading udpates, analysts at Barclays said they expected refining to be a key source of weakness for oil companies this earnings season.

Shares in TotalEnergies fell about 4.5% in midday trading in Europe as oil prices plunged, dragging down oil stocks on reports that Israel is willing to avoid targeting Iranian oil facilities and concerns about a weaker global demand outlook.

TotalEnergies said it expects third-quarter hydrocarbon output of 2.4 million barrels of oil-equivalent a day, having guided for production of 2.4 million to 2.45 million BOE a day. This compares with the output of 2.44 million barrels a day TotalEnergies reported for the second quarter.

Unplanned shutdowns in the company’s Ichthys liquefied natural gas project in Australia and security-related disruptions in Libya were partially mitigated by the ramp up of production at its Mero 2 Project in Brazil, TotalEnergies added.

TotalEnergies isn’t the first oil company to highlight growing security issues in Libya. Austria’s OMV said in early October that its oil production in the North African state has been disrupted since August as political instability continues to grow.

Integrated liquefied natural gas results are expected to come in above $1 billion, having reported $1.2 billion in adjusted net operating income in the second quarter.

TotalEnergies said the results for its integrated power division are expected to be broadly in line with the second quarter.