Exxon Mobil Corp reported a steeper-than-expected drop in quarterly profit as natural gas and crude oil prices slid from a year ago and the global recession hurt demand for fuel.

Exxon shares fell 1.6 percent in early trading.

Exxon, which raked in record profits last year, has seen earnings wither as crude oil prices have fallen by more than half from a year ago. Refiners have also seen margins under pressure as weakness in industrial demand for fuels like diesel has caused a buildup in stockpiles.

It looks disappointing, said Phil Weiss, an analyst at Argus Research. They missed on margins and production.

Exxon, the world's largest publicly traded oil company, said second-quarter net income was $3.95 billion, or 81 cents per share, down from $11.68 billion, or $2.22 per share, a year earlier.

Earnings excluding one-time items were $4.09 billion, or 84 cents per share. Analysts on average had expected $1.02 per share, according to Reuters Estimates.

Revenue fell 46 percent to $74.46 billion.

Global economic conditions continue to impact the energy industry both in the volatility of commodity prices and reduced demand for products, Rex Tillerson, Exxon's chief executive, said in a statement.

Second-quarter production fell 3 percent from a year earlier, the Irving, Texas, company said. Analysts had been looking for production to be flat or slightly higher.

Earnings in the company's exploration and production business fell 62 percent to $3.8 billion, while earnings in the refining unit fell 67 percent to $512 million.

In the first six months of the year, Exxon said it spent $12.3 billion, in line with its longer-term plan for capital spending of $125 billion over 5 years.

In the second quarter Exxon repurchased 75 million shares of its stock at a gross cost of $5.2 billion. In the third quarter it expects to buy back $4 billion of stock.

Shares of Exxon were down $1.16 to $70.27 in early trading on the New York Stock Exchange.

(Reporting by Anna Driver in Houston; editing by John Wallace)