Eyes on oil output as majors battle refining slump

SAN FRANCISCO (Reuters) – This quarter’s earnings from oil majors like Exxon Mobil Corp and BP Plc will put the focus on their integrated structure as they bank on rebounding oil prices to offset dismal refining results.

Refineries are struggling as demand remains limp and the cost of their input – oil – keeps rising. That places the onus on the majors’ exploration and production arms, leading to more scrutiny of new wells due to come on line in the months ahead.

Few anticipate a dramatic recovery in global demand for oil products next year, so oil majors also face tough decisions on what to do about surplus refining capacity, as do the dedicated refiners such as Valero Energy Corp.

After a tough year for Exxon, whose stock is down 7 percent in 2009 while the sector .OIX is up 20 percent, the Irving, Texas-based giant’s outlook will be especially important.

“We want to make sure the projects in the queue are going as planned, and hopefully there will be production growth in 2010,” said Neal Shah, senior energy analyst with First American Funds in Milwaukee, Wisconsin.

Reuters