Chevron, the second-largest U.S. oil company by market value, said Thursday in its interim report, U.S. refining margins were down sharply, more than offsetting an increase in its marketing margins.
Crude prices certainly haven't reached the $147 per barrel record highs of last July. But crude had rebounded in recent weeks, giving some hope that oil companies would see some benefit.
The San Ramon, Calif.,-based company said the weakening dollar against most other major currencies diminished any benefits it would have experienced from higher crude prices.
On the U.S. refining side, rising crude prices -- which increased the company's input costs -- coupled with continued weak domestic demand is expected to dig into Chevron's profits. Refiners would have a hard time passing along the cost of crude onto consumers buying gas simply because the demand is not there.
The company reported flat oil and gas output in first two months of the second quarter, with an increase of 11,000 barrels a day in the U.S. due to activities in the Gulf of Mexico and restoration of operations damaged by hurricanes last September. International net-oil equivalent production decreased by 13,000 barrels a day.
Two major fields that came online -- the Tahiti field in the Gulf of Mexico in May and the Frade field offshore Brazilin June -- will likely boost those numbers in the coming year. Frade, the company's first operated deepwater development in Brazil, is expected to hit a peak production of 90,000 barrels of crude oil and liquid natural gas per day in 2011. The Tahiti field is expected to reach up to 125,000 barrels of crude per day before the end of the year.
ConocoPhillips also reported in an interim secon-quarter update this week that its refining and marketing segments are expected to be impacted by high inventory levels and narrowing crude-to-fuel refining margins.
Chevron is scheduled report its second-quarter earnings July 31. Conoco's secon-quarter earnings report is scheduled for July 29.