Oil Ends Lower on Mixed Inventory Data

Meanwhile, energy company earnings cascade in.
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Updated from 2:46 p.m.

Oil edged lower Wednesday on mixed inventory data that showed a greater-than-expected drop in crude stocks and a 10th consecutive rise in distillates.

Crude for September delivery closed down 9 cents to $59.11 on Nymex. Gasoline futures added 1 cent to $1.71 a gallon.

For the week ended July 22, the Energy Department said, U.S. crude inventories fell by 2.3 million barrels to 317.8 million barrels; analysts had expected a 900,000-barrel decline.

Gasoline inventories shrank by 2.1 million barrels, while distillates, including heating oil and diesel, rose by 3.1 million barrels. Analysts had been forecasting a 1.7 million-barrel distillates build.

Refineries operated at 93.5% capacity, slightly higher than in the previous week.

Oil remained stuck in the $57- to $60-a-barrel range it has inhabited for about three weeks as bulls and bears fight wars around the inventory situation, various estimates of demand growth and the impact of an active hurricane season.

The sparring took an unexpected turn Wednesday when the Energy Department indicated that it plans to revise its assessment of U.S. energy demand in 2004. If last year's totals go up, one effect would be to lower the rate of demand growth that has been observed in 2005.

Larry Alverson, who writes the weekly petroleum status report for the government, said gasoline demand, which currently shows up in the report as having increased by 2.4% over last year, probably really rose by 1.6%.

Alverson also confirmed that previous data showing 5% and 6% increases in distillates demand were probably incorrect. "It's not a mistake, it's a revision, and we had to do that twice in the last six years," Alverson said.

Statistics suggesting burgeoning energy demand in the U.S. are often trotted out by bulls as evidence oil prices have further to rise.

Elsewhere, a multitude of companies reported second-quarter results Wednesday.

Amerada Hess

(AHC) - Get Report

said profit rose 4% from last year but missed analysts' expectations.

ConocoPhillips

(COP) - Get Report

said earnings jumped 51% from a year ago to $3.13 billion, or $2.21 a share, on a 34% rise in sales to $42.6 billion. The per-share number was 19 cents ahead of estimates. Its stock rose 69 cents, or 1.1%, to $62.11.

After the market closed on Tuesday,

Murphy Oil

(MUR) - Get Report

reported second-quarter earnings that were essentially flat compared with the same time a year ago, but still beat analysts' expectations.

Net income was $347.7 million, or $1.85 a share, compared with income of $349.9 million, $1.87 a share, a year ago. This year's results include an after-tax gain of $106.8 million, or 57 cents a share, on the sale of mature oil and gas properties on the continental shelf of the Gulf of Mexico, one of the major drivers of this quarter's results. Analysts on average estimated the company would earn $1.19 a share, according to Thomson Financial.

Results were driven by higher oil and natural gas prices, higher oil sales volume and an asset sale, partially offset by a higher exploration expense and lower natural gas sales volume in the 2005 quarter, the company said.

The company's refining and marketing operations generated a record quarterly profit of $67.4 million due to "significantly better refining margins in the United States in the 2005 quarter," it said. Murphy shares lost $1.01, or 1.9%, to $52.99.

Meanwhile,

Diamond Offshore

(DO) - Get Report

said it swung to a second-quarter profit, roughly in line with Wall Street's expectations, driven by high day rates and a strong offshore drilling market. Net income for the deep water driller was $41.3 million, or 31 cents a share, compared with a net loss of $10.5 million, or 8 cents a share, in the same period a year earlier. The latest quarter had a gain of $5.9 million due to an asset sale. Revenue for the second quarter of 2005 was $283.4 million. Shares slid 90 cents, or 1.6%, to $56.60.

Among the independent exploration and production companies,

EOG Resources

(EOG) - Get Report

said second-quarter earnings were $238.9 million, or 98 cents a share, compared with $123.1 million, or 52 cents a share, a year ago. That beats analysts' average estimate of 89 cents a share, according to Thomson Financial.

The company said natural gas production rose 21% as a result of successful drilling, predominantly in the Barnett Shale and in various areas of Texas and the Rocky Mountains.

"Because production results exceeded our original expectations for the first half of the year, we are increasing EOG's 2005 full-year production growth target from 13.5% to 15.5%. Essentially all of this is organic," said Mark Papa, chairman and CEO, in a release. Despite the results, shares of EOG fell $1.38, or 2.1%, to $63.97.

Independent energy and chemicals producer

Kerr-McGee

(KMG)

said second-quarter earnings nearly tripled to a record $370.8 million, or $2.60 a share, driven by higher oil and natural gas sales prices and higher chemical operating profit. Adjusted income was $378.4 million, or $2.65 a share, excluding discontinued operations and other items. Revenue rose to $1.85 billion from $1.1 billion in the year-ago period. On average, analysts expected profit of $2.35 a share, according to Thomson First Call.

The company said the increase in earnings was due to a higher sales volume and prices of oil and gas, generated primarily by the Westport Resources acquisition in June and by the start of production in China and the Gulf of Mexico. Shares rose 1% to $79.94.

Burlington Resources

(BR) - Get Report

, an independent natural gas producer, raised its quarterly dividend to 10 cents from 8.5 cents. The company has also repurchased more than 9 million common shares during the first half for about $444 million.

And

Marathon Oil

(MRO) - Get Report

raised its quarterly dividend by 5 cents to 33 cents. Marathon will report it quarterly earnings on Thursday.