Chevron says Q2 hit by U.S. refining, weak dollar

By Braden Reddall

SAN FRANCISCO (Reuters) - Chevron Corp (CVX.N) warned that second-quarter earnings would be hit by a sharp decline in U.S. refining margins and that any benefits from higher oil prices were largely offset by a weaker dollar, sending its shares down 1.8 percent.

The outlook from the second-largest U.S. oil company only contributed to the gloom surrounding the country's refiners in the face of toughening regulation and a depressed fuel market.

Chevron said on Thursday the decline in second-quarter U.S. refining margins more than offset an increase in marketing margins, while margins were mixed outside its home country.

Refining margins have been squeezed by higher crude prices, which lift input costs, and weak demand due to the recession.

"Downstream results are projected to be significantly lower than the first quarter," Chevron said in its interim update.

Chevron said U.S. oil-equivalent production in April and May was 682,000 barrels per day (bpd), up from 671,000 in the first quarter, while international output was 1.979 million bpd, down by 13,000 bpd from the previous quarter.

Chevron is targeting overall average output of 2.63 million bpd for 2009. In late May, about 100,000 bpd of production in Nigeria was shut in due to violence. But a series of projects are also starting up this year, including its Frade project off the coast of Brazil.

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