Shell disappointed investors on Thursday with below-forecast fourth-quarter profit, with concerns over its refining business overshadowing a sharp rise driven by higher oil prices.

The results followed strong earnings from Chevron and Exxon Mobil, although BP, struggling to put the Gulf of Mexico oil spill behind it, fared less well.

Shell shares fell 3 percent, with analysts saying they had expected more and expressing concern over continued weakness in the Anglo-Dutch oil major's refining business, with oil product sales rising just 5 percent year-on-year.

Our earnings were impacted by weak refining margins, pressure on certain regional natural gas prices, and volatility in downstream marketing margins as a result of rising oil prices, Shell said.

Arbuthnot analyst Dougie Youngson said margins would be under increased pressure if oil prices remained at around $100 a barrel for long.

Benchmark U.S. crude prices averaged about $85 per barrel in the fourth quarter, up from $76 in the fourth quarter of 2009, but have since risen to above the $100 mark.

The global market continues to see weak demand and pricing for oil products, Youngson said in a note.

Shell said that despite a year-on-year improvement its refining results were lower compared with the third quarter because of increased downtime at major refining facilities.

Shell's earnings on a current cost of supplies (CCS) basis, jumped to $5.7 billion from $1.2 billion a year ago when it suffered heavy refining losses. But Jos Versteeg, an analyst at Theodoor Glissen, said this was still less than anticipated.

Excluding non-operating and one-off items the fourth quarter result was $4.1 billion, short of a forecast for $4.85 billion, according to a Reuters poll.

Analysts welcomed Shell's announcement of a $0.42 dividend for the quarter and the fact it expected to maintain that level for the first quarter of 2011.

Shell's planned capital investment of $25-$27 billion for 2011 was also well received, with Sanford Bernstein's Oswald Clint saying capex appeared under control.

However, Arbuthnot's Youngson said he was concerned about Shell's focus on gas, given continued price weakness and oversupply forecasts.

(Additional reporting by Tom Bergin; Writing by Alexander Smith; Editing by Greg Mahlich and Dan Lalor)

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