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Exxon Mobil Corp. (XOM) on Thursday said its profit rose to $10.49 billion in the third quarter, making it the second-largest quarterly profit ever recorded by a publicly traded U.S. company.The world’s biggest oil company said its net income amounted to $1.77 per share for the July-September period, up from $9.92 billion, or $1.58 per share, a year ago.

The results surpassed the expectations of Wall Street analysts. On average, analysts expected the company to earn $1.59 per share in the quarter.

Revenue fell to $99.59 billion from $100.72 billion from a year ago, which saw then-record oil prices because of hurricanes Katrina and Rita.

The largest quarterly profit ever was Exxon’s $10.71 billion profit in the fourth quarter of 2005.

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The Organisation of the Petroleum Exporting Countries on Thursday night agreed to cut production by 1.2m barrels a day, showing its determination to defend $60 as its new minimum international price.

The cut, which was deeper than the market had expected, will take Opec production to 26.3m barrels a day if it is fully implemented on November 1.

Saudi Arabia, the world’s biggest oil producer, on Thursday warned that the cartel could make a second cut as early as December.

But oil prices reversed gains made in early Friday trading as traders questioned whether the cuts would stick. Nymex December crude fell 71 cents to $59.79 a barrel, while ICE Brent futures fell 70 cents to $60.17 a barrel.

Opec oil ministers, who had for the last two weeks been divided over how to implement the cut, on Thursday agreed that each of Opec’s 10 active members would participate on a pro rata basis, said Edmund Daukoru, Nigeria’s oil minister and Opec’s current president.

Ali Naimi, Saudi Arabia’s oil minister, told reporters on Thursday: “The price is determined by the market, what we try to do is to make the market balanced. Today there is a dis-equilibrium between supply and demand. Today we are trying to get the market to the normal equilibrium and the price will take care of itself.”

He added that the possibility of another cut “is there”.

Vera de Ladoucette, an analyst at the consultancy Cambridge Energy Research Associates, said: “Usually when the decision is taken it has already been priced into the market. But sometimes Opec can surprise. The market is going to be caught off guard today by this decision.”

Oil producers have watched with concern as crude oil inventories have grown, indicating that the market is oversupplied.

US inventories of crude have risen in the past week by 5.1m barrels a day to levels 8 per cent above those of a year ago, according to data published on Wednesday by the Energy Information Administration, the statistical arm of the US Department of Energy.

Oil prices in the last three months have fallen 25 per cent to below $60 a barrel. Mr Daukoru said: “We have never seen a drop [in the price of oil] like this in many years.”

But despite its price concerns, Saudi Arabia did not want to return to being Opec’s swing producer of oil, a role it played from 1980-86, when it cut supplies as prices fell. Therefore, it was imperative to get the rest of Opec on board.

The full seriousness of Opec’s resolve will only become apparent in the next two months as members either adhere to the decision or cheat by not fully cutting their share.

As divisions had appeared within Opec within the past two weeks, traders began to doubt the cartel’s ability to act.

They will be looking at whether the cuts will be adhered to by at least the cartel’s lead members.

Opec’s ambition to cut supplies comes at a cost, particularly for countries that have heavily invested their petrodollars into building up their oil sectors. Libya, the United Arab Emirates, Nigeria and Algeria have courted international energy groups to help them boost their production.

Venezuela, Indonesia, Qatar and Iran also have international oil companies working in their fields. These members of Opec will now have to tell the likes of Europe’s Royal Dutch Shell, BP, Total, Repsol and the US’s ExxonMobil and ChevronTexaco to reduce the output from their fields and forgo revenue. How much each company will have to sacrifice will depend on how Opec splits the burden of the cut among its member states.

But the news is not all bad for the companies as they will benefit from any boost in prices that follows Opec’s decision.

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Exxon Mobil Corp. and Royal Dutch Shell Plc, the world’s two biggest oil companies, posted higher third-quarter earnings than analysts expected after crude prices soared to a record and production increased.

At Irving, Texas-based Exxon Mobil, net income rose 5.7 percent from a year earlier to $10.5 billion, or $1.77 a share, the company said today in a statement. Shell’s net income dropped 34 percent to $5.94 billion. Profit excluding a year- earlier divestiture and changes in inventory values rose to $7.03 billion from $5.8 billion.

“Oil demand is quite surprisingly strong and doesn’t seem to be responding as one would expect to higher prices, said Robbert Van Batenburg, head of research at Louis Capital Markets LP in New York. “The big enigma for Wall Street is whether these earnings are sustainable going forward.

Exxon Mobil shares touched a record high after the company reported its 10th straight increase in profit and its biggest production gain since Exxon Corp.’s 1999 acquisition of Mobil Corp. The world’s three largest oil companies — Exxon Mobil, Shell and BP Plc — netted $172,000 a minute during the quarter.

“The long-term outlook for Big Oil is very bullish, said Jim W. Oberweis, who oversees $2 billion at Oberweis Asset Management in Lisle, Illinois. “Demand continues to be strong, and supplies just aren’t keeping up.

Exceeding Expectations

Exxon Mobil’s profit was 18 cents a share higher than the average estimate from 20 analysts surveyed by Thomson Financial. Shell, based in The Hague, exceeded the average estimate for earnings excluding one-time items by $1.43 billion.

“Our earnings have proven to be resilient in the face of rising industry costs and weakening refining margins, Shell Chief Executive Officer Jeroen Van der Veer said in a statement.

Van der Veer was able to increase production from a year earlier for the first time since 2003 as new offshore fields made up for rebel attacks that disrupted output in Nigeria’s Delta region. Exxon Mobil Chief Executive Officer Rex Tillerson lifted production for a third straight quarter by tapping new wells in Africa, Qatar and Russia.

Oil producers are ramping up spending on exploration and production to capitalize on high prices. U.S. oil futures rose to a record $78.40 a barrel on July 14 on demand gains around the world and concern over supply disruptions, such as those in Nigeria. The futures averaged $70.60 a barrel during the quarter, up 12 percent from a year earlier.

Prices Lift Profit

Each $1 increase in oil prices boosts Exxon Mobil’s earnings per share by 1.5 percent, according to Citigroup Inc. estimates.

Exxon Mobil’s profit was its second-highest on record for any quarter. Excluding a $1.62 billion gain last year on the sale of a pipeline business, profit rose 26 percent.

It was a very impressive quarter by a lot of measures, said Richard Moroney, who helps manage $130 million, including Exxon Mobil shares, as chief investment officer at Horizon Investment Services LLC in Hammond, Indiana. “They’ve put a lot of money into long-term projects that are starting to contribute to earnings now.

Shares of Exxon Mobil rose 61 cents to $71.62 in New York Stock Exchange composite trading and touched a record high at $72.33. Shell’s Class A shares rose 43 pence, or 2.4 percent, to 1,832 pence ($34.64) in London.

BP, ConocoPhillips

Exxon Mobil and Shell are the latest among the world’s major oil companies to report third-quarter earnings. BP Plc, based in London, on Oct. 24 said its profit fell 3.6 percent to $6.23 billion.

ConocoPhillips, the third-biggest U.S. oil company, yesterday reported a 2 percent gain in net income, to $3.88 billion. Chevron, the No. 2 U.S. producer, plans to release its results tomorrow.

Gains in oil prices and production made up for drops in natural-gas and gasoline prices. Natural-gas futures averaged $6.18 per million British thermal units. That marked a 36 percent drop from a year earlier, when hurricanes idled most Gulf of Mexico production of the heating and power-plant fuel.

The average U.S. margin on processing crude oil into gasoline and diesel narrowed 26 percent from a year earlier to a third-quarter average of $11.29 per barrel processed, based on benchmark New York futures prices.

Exxon Mobil’s cash reserves swelled to $37.3 billion at the end of September, exceeding the gross domestic products of countries such as Luxembourg and Ecuador. The company spent $7 billion in the third quarter on stock buybacks.

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Top world oil exporter Saudi Arabia said on Friday it was taking measures to protect its oil and economic installations from a “terrorist threat”.

Western naval forces in the Gulf have been deployed to counter a possible seaborne threat to its Ras Tanura oil terminal.

“The terrorist threat to the kingdom’s economic installation exists and it is a declared goal of the straying faction to affect the interests of the Saudi citizen,” an Interior Ministry spokesman said.

“Saudi security forces are cooperating and coordinating with the Saudi navy to take the necessary security measures,” he told Reuters.
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LONDON – Crude oil futures fell Friday, backing off gains they made following reports of a terror alert in the Gulf region.
 
A British navy official in Dubai said Coalition naval forces in the Gulf are on watch for possible terror threats to oil facilities in Saudi Arabia and Bahrain.

The official said a threat from al-Qaida last month to target Gulf oil terminals had resulted in stepped-up security and vigilance at Saudi Arabia’s Ras Tanura terminal, as well as a refinery in Bahrain.

Light, sweet crude for December was down 31 cents to $60.05 a barrel on the New York Mercantile Exchange, aftering rising as high as $60.85. Brent crude fell 1 cent to $60.76 a barrel at London’s ICE Futures exchange.

Norway’s state-controlled oil company Statoil ASA also announced Friday that the 200,000 barrel per day Snorre A and Vigdis offshore oil platforms have been restarted after defective lifeboats were upgraded to meet Norwegian safety standards.

Statoil had been forced to shut down Snorre A and the linked Vigdis platform on Oct. 13 because an industry study found defects in lifeboats essential to evacuating crew in a crisis.

Traders said speculation in the market was that prices would climb, with winter demand for heating oil and natural gas expected to buoy energy prices in coming months, but that a stream of price-positive news is needed to lift prices higher.

November heating oil fell 2 cents to $1.6801 a gallon, while unleaded gasoline fell more than half a cent to $1.5570 per gallon. Natural gas dropped 4.2 cents to $7.455 per 1,000 cubic feet.

Cold weather increases demand for both natural gas and heating oil. Heating oil is most prevalent in the U.S. Northeast, where nearly one-third of households use it as their primary heating fuel.

Tom Bentz, a trader at BNP Paribas in New York, said that movement of money from the front-month contracts to later months was partly behind the crude drop Thursday, when the contract fell $1.04 to $60.36 a barrel.

It had settled Wednesday at $61.40 a barrel, the highest close since Sept. 29, after the U.S.        Department of Energy said inventories unexpectedly shrunk last week amid the highest demand for oil products since last December.

Adding to support for crude oil prices is a growing view the Organization of Petroleum Exporting Countries will implement more of the 1.2 million barrels of output cuts announced last week than previously thought.

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Here is a little news blurb I found on YouTube that I found interesting.  President Bush Senior was discussing the oil mandate that Hugo Chavez has with respect to selling his countries oil to the “poor” people of the world with Larry King.  Bush’s responce was classic.  Basically the gist of his rebuttal was that Hugo Chavez was an ass, that regardless of what he claims, he is still selling his oil for top dollar.  So how does this help the “poor” people?

Watch the Larry King clip.  It is interesting!