LONDON (Reuters) -Shell's (SHEL, SHELL.AS, SHEL.L) refining profit margins dropped sharply in the third quarter from the previous three months as global demand sagged, while oil product trading earnings also weakened, it said on Monday.

In a trading update ahead of its quarterly results on Oct. 31, Shell said its indicative refining margins dropped by nearly 30% to $5.5 a barrel in the three months to the end of September from $7.7 a barrel in the previous period.

Trading results for its chemicals and oil products division were expected to be lower than in the second quarter, Shell said.

Global refining margins have come under pressure in recent months due to slowing economic activity, especially in China, and as new refineries came on line.

Shell, the world's largest trader of liquefied natural gas, also lifted its LNG production guidance for the quarter to a range of 7.3 million to 7.7 million metric tons for the quarter from a previous forecast of 6.8 million to 7.4 million tons.

LNG trading results were set to be in line with the previous quarter.

The London-listed company also lifted its upstream oil and gas production outlook for the quarter to 1.74 million to 1.84 million barrels of oil equivalent per day from 1.58 million to 1.78 million boed.

Last week, Exxon Mobil (XOM) warned that a slump in oil prices was set to hit its third-quarter results.

Oil prices fell by 17% in the third quarter, the largest quarterly decline in a year, on worries about the global oil demand outlook. Brent futures settled at $71.77 a barrel on the last trading day of the quarter.

(Reporting by Ron Bousso; Editing by Jan Harvey)