Global demand weakness to weigh on Q3 refining margins, Shell (SHEL.US) says

Shell (SHEL.US) said on Monday that its refining margins in the third quarter would fall sharply from the previous quarter due to a weaker overall economy and a drop in global demand, while trading results for refined products would also decline, and it expected a loss in its chemicals business.Global refining margins have been under pressure in recent months due to a slowdown in economic activity and the start-up of new refineries. In a trading update ahead of its quarterly earnings on October 31, Shell said its refining margins in the third quarter would fall nearly 30% from the previous quarter to $5.5 per barrel from $7.7 per barrel.The metric was slightly higher in chemicals, but the company still said it expected the business to post a "marginal loss". Trading results for Shell's chemicals and oil products division are expected to be lower than in the second quarter, the company said.Shell, the world's largest liquefied natural gas trader, also raised its production guidance for the quarter to 7.3 million to 7.7 million tons from its previous forecast of 6.8 million to 7.4 million tons. Trading results for liquefied natural gas are expected to be flat from the previous quarter.Shell also raised its production guidance for upstream oil and gas in the quarter to 1.74 million to 1.84 million barrels per day from 1.58 million to 1.78 million barrels per day.Last week, Shell's biggest rival Exxon Mobil (XOM.US) warned that falling oil prices and declining refining margins would cut its third-quarter earnings by $1.6 billion. Oil prices fell 17% in the third quarter, the biggest quarterly drop in a year, and closed at $71.77 per barrel on the last trading day of the quarter.The unexpected weakness forced oil market participants, who usually see the most demand in one of the quarters, to adjust, and OPEC and its allies delayed the restart of some idled capacity. However, prices have rebounded due to tensions in the Middle East.While the international oil giants have prepared for lower profits, there has been no sign yet that they will cut investor returns. Totalenergy, the French oil and gas producer, has promised to continue buying back shares and raising dividends next year due to the launch of new projects.