Oil jumps 3 per cent to $63 as energy firms slash investments

Brent this week dipped to its lowest since May 2009 at $58.50 a barrel due to rising production in US, weak economic growth and OPEC members' decision not to cut output.

Photo: Reuters Photo: Reuters

Brent crude jumped 3 per cent to above $63 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 US 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 are threatening future production have given some traders pause. Oil prices were volatile on Wednesday, briefly spiking as much as 6 per cent as players rushed to close short positions, before falling back.

At 1109 GMT on Thursday, Brent for February delivery was $2.09 higher at $63.27, after settling up $1.17 in the prior session.

US crude for January delivery, which expires after Friday's settlement, was up $1.83 at $58.30 a barrel.

"It looks like investors favour 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 has put a plan to drill for oil in the Beaufort Sea in Canada's Arctic on indefinite hold, while Marathon Oil cut its capital expenditure for next year by about 20 per cent.

Canadian oil producers also deepened cuts in 2015 spending, as Husky Energy, MEG Energy and Penn West Petroleum 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.

Organization of Petroleum Exporting Countries (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.