* Says refining "marginally worse" than in Q2
* Taking steps to control costs, run lower-cost crudes
CALGARY, Alberta, Oct 15 (Reuters) - A weak North American economy squeezed margins for Imperial Oil Ltd's (IMO.TO) refining business even more than in the second quarter, when Canada's No.2 oil refiner reported a loss from the business, the company's chief executive said on Thursday.
Imperial CEO Bruce March said reduced demand has narrowed spreads between gasoline and diesel oil in Canada and the U.S. to "the lowest they've been in a long, long time."
The company, 69.6 percent owned by Exxon Mobil Corp (XOM.N), reported a C$38 million ($36.9 million) loss from its downstream operations in the second quarter and the business has not improved since, he told reporters following a speech to a Calgary business audience.
"It hasn't changed for the better (since the second quarter)," he said. "I would think it's marginally worse in terms of its margin, its earnings potential."
Imperial owns four refineries in Canada and supplies a network of nearly 2,000 Esso-branded retail stations across the country,
March declined to say if he expected to report another loss from the refining business when Imperial details its third-quarter earnings on Oct. 27.
He said Imperial was trying to weather the weak environment by keeping control of its costs, exporting some refined product to the U.S. market and using less expensive varieties of crude oil as a feedstock for its refineries.
"We're trying to run different types of crude oil -- lower cost, higher value -- than we ever have before," he said.
Imperial shares rose C$1.33 to C$44.33 on Thursday on the Toronto Stock Exchange. The shares have risen 36 percent over the past 12 months.
$1=$1.03 Canadian Reporting by Scott Haggett; editing by Rob Wilson