Brent crude rose 2 percent to above $62 a barrel on Thursday, extending a rebound from five-year lows this week as oil’s six-month price rout forced more energy firms to cut investments in new production.
Oil this week slumped as low as $58.50 and has almost halved since June as fast-growing U.S. shale output overwhelms demand, with losses accelerating after producer group OPEC decided not to cut output at its meeting last month.
But signs that lower prices threaten future production have given some traders pause. Oil was volatile on Wednesday, briefly spiking as much as 6 percent as players rushed to close short positions.
At 9:10 a.m. EST on Thursday, Brent for February delivery LCOc1 was $1.07 higher at $62.25, after settling up $1.17 in the prior session.
Brent pared gains slightly after hitting an intraday high of $63.70.
It is up around 6.5 percent since Tuesday’s five-year low.
U.S. crude CLc1 for January delivery, which expires after Friday’s settlement, was up 45 cents at $56.92 a barrel.
“It looks like investors favor support around $60 a barrel,” said Daniel Ang, an investment analyst at Phillip Futures in Singapore, adding that lower investment in production could be felt in the market as early as the second quarter of 2015.
Chevron Corp (CVX.N) has put a plan to drill for oil in the Beaufort Sea in Canada’s Arctic on indefinite hold, while Marathon Oil (MRO.N) cut its capital expenditure for next year by about 20 percent.
Canadian oil producers also deepened cuts in 2015 spending, as Husky Energy (HSE.TO), MEG Energy (MEG.TO) and Penn West Petroleum (PWT.TO) joined those hacking back capital budgets.
The oil minister of top OPEC producer Saudi Arabia said on Thursday he believes the drop in prices will be short-lived as demand for crude picks up.
“I am optimistic about the future, what we are facing now and what the world is facing is a temporary situation and will pass,” Ali al-Naimi was quoted by state news agency SPA as saying.
OPEC members that backed an output cut last month are coming around to the Saudi view that they need to focus on market share.
“We are just watching and selling oil at whatever the price is,” said a delegate from an OPEC country that had wanted an output cut in November.
Saudi Arabia, which opposed cutting output, raised exports in October to 6.9 million barrels per day from 6.7 million bpd in September, data showed. (Reuters)