UPDATE 2-Marathon quarterly output seen at low end

(Recasts first paragraph, adds details about refining business, share price; changes dateline, previously NEW YORK)

HOUSTON, Jan 13 (Reuters) - Marathon Oil Corp (MRO.N) said on Tuesday it expects its fourth-quarter oil and natural gas output to fall to the low end of its estimates, weighed down by disruptions from hurricanes in the Gulf of Mexico.

The Houston company said the volume of oil and natural gas available for sale in the period is expected to be 401,000 barrels of oil equivalent per day, near the bottom of its prior forecast for 400,000 to 440,000 barrels of oil equivalent per day.

Even so, Marathon shares rose more than 2 percent, boosted by a 1.5 percent gain in the price of crude oil.

On a sequential basis, the Houston company's output rose. The volume of oil and natural gas available for sale in the third-quarter was 389,000 barrels of oil equivalent per day, Marathon said.

Marathon expects refined products sales volume to average about 1.4 million barrels per day (bpd) in the fourth quarter of 2008 compared with 1.43 million a year ago.

The company estimates its fourth quarter refining and wholesale marketing gross margin to be about 12 cents per gallon, up from nearly 5 cents per gallon earned a year ago.

Improvement in 2008 fourth-quarter refining margins will be fueled by the sharp drop in crude oil prices seen in the period.

Crude oil prices, which had averaged $118 per barrel in the third quarter, tumbled to about $59 per barrel in the fourth quarter, hit by worry about demand during the global slowdown. In the 2007 fourth quarter, crude oil prices averaged about $90 per barrel.

Last week, larger rival Chevron Corp (CVX.N) said its fourth-quarter earnings would be significantly lower than the previous quarter, as the 50 percent drop in average oil prices in the period hurt its exploration and production business.

Marathon said its fourth-quarter 2008 exploration expense is now expected to be between $125 million and $175 million.

Marathon shares were up 63 cents at $28.39 in afternoon trading on the New York Stock Exchange. (Reporting by Anna Driver and Euan Rocha in New York, editing by Dave Zimmerman and Andre Grenon)