^[1]By Duncan Sutherland - Exclusive to Crude Investing News

Well, good news for Exxon (NYSE:XOM) this week. The oil giant posted a record $11.68 billion profit this quarter. On revenues of $138 b, this works out to the largest quarterly net income in history ^[2]. Ironically, this was still short of analysts' expectations, and the stock dropped some three percent after the news was released.

This small decline in share price after what looks like unalloyed good news applied to many oil giants. ConocoPhillips (NYSE:COP), Chevron (NYSE:CVX), Occidental (NYSE:OXY), Total (NYSE:TOT), and BP (NYSE:BP) were all trading downward by small margins after posting huge profits. Paradoxically, high oil and natural gas prices have a deleterious effect on the energy-intensive refining operations of such companies.

More intriguing is that for Royal Dutch Shell (NYSE:RDS.A), Exxon and Eni (NYSE:E), the huge reported profits come during a quarter of reduced production ^[3]. For Shell, some of the production problems can be traced back to Nigeria ^[4]. Almost 220,000 barrels per day of potential Nigerian production is not being realized due to continuing strife in Delta State. A series of attacks by the loose confederation of militants known as the Movement for the Emancipation of the Niger Delta (MEND) has kidnapped oil workers, damaged pipelines and incited labour action. Exxon and Eni each have stakes in Shell's Nigeria venture. However, much of Shell's problems can be traced to maturing assets in North America, Europe, and the Middle East.

Eni had problems with its UK, Australian and Italian operations, but acquisitions in the Gulf of Mexico, central Africa and the Caspian/Central Asian regions offset this.

Less mixed has been the effects of the long oil trading boom on the New York Mercantile Exchange itself. NYMEX Holding Inc (NYSE:NMX) has more than doubled ^[5]its quarterly profit since last year. The market is in the process of being acquired by CME Group Inc (NASDAQ:CME).

The US Senate's Stop Excessive Energy Speculation Act continues to wend its way through the legislature. The bill managed to evade cloture ^[6] after being introduced to the full body last week, so it is largely stalled. A similar House of Representatives bill has failed a full vote ^[7] after partisan sparring over including an amendment to lift the Congressional moratorium on offshore drilling.

Keeping an eye on Iraq's resurrection of the oil industry may pay off in the longer term. Shell has recently admitted ^[8] that there has been little progress on signing any contracts with the Iraqi government. Problems began when leaks to the press suggested ^[9] that the oil majors were getting preferential access and potential long-term contracts. Such rumours were dispelled when it became clear that the Iraqi government was trying to forge short-term service contracts without elements of production sharing. With the continuing presence of American troops, Nouri al-Maliki's government is not going to win any public support by appearing deferential to American or European oil majors. As Iraq has provincial elections scheduled for October 1st ^[10], the incentive for Mr. Al-Maliki is to appear as a tough nationalist.

Thanks for reading, and if anyone has questions, rebuttals or suggestions for future Benchmarks and articles, let me know in the comments below. Also, if you liked this you may also enjoy similar sites on Natural Gas ^[11] and Heavy Oil/Oil Sands ^[12].