Oil giant Shell has seen a big dip in its profits in the first three months of the financial year.

But even though its adjusted net earnings fell by 48%, the group still managed to make a profit of $2bn (�1.3bn).

The company blamed the drop in earnings on lower oil and gas prices and weak demand.

The oil products part of the business, which includes the petrol forecourts, saw the sharpest fall.

Prices rising

Shell reported profits of $441m (�301m) compared to $958m (�654m) for the same period last year.

The economic slowdown in the United States has had a marked effect on demand.

And oil prices have been rising as tensions in the Middle East have escalated.

Shell said: "The outlook for oil prices is dependent on the speed of economic recovery in the USA and developments in the Middle East".

Dismal figures

The City was relieved that Shell had managed to produce profits close to analysts' highest predictions and the share price immediately rose.

Last week Shell's rival BP reported that its profits had plunged by more than half to $1.58bn (�1.1bn).

Just as with Shell, those figures were marginally better than expected, prompting investors to snap up BP shares.

London's City had expected poor results from the two oil giants after the world's largest oil firm, US-based ExxonMobil, reported some dismal figures.

Shell shares closed up 3.6% higher at 498 pence.