Brent edges further above $61 as companies cut upstream investments

Photo: Reuters

Brent crude edged further above $61 a barrel on Thursday, after sharply lower prices forced companies to cut upstream investments around the world.

Chevron Corp has put a plan to drill for oil in the Beaufort Sea in Canada's Arctic on hold indefinitely, while Marathon Oil cut its capital expenditure for next year by about 20 percent.

Canadian oil producers also deepened 2015 spending cuts, as Husky Energy, MEG Energy and Penn West Petroleum joined those hacking back capital budgets in response to tumbling crude prices.

Brent this week dipped to its lowest since May 2009 at $58.50 a barrel, falling close to 50 percent since late June due to rising production in the United States, weak economic growth and a decision by OPEC members last month not to cut output.

"It looks like investors favor support around $60 a barrel," said Daniel Ang, an investment analyst at Phillip Futures in Singapore, adding that lower upstream investments could begin to affect prices from the second quarter of next year.

"But with U.S. production still strong, the bearish trend looks set to continue for now. I think it's just a matter of time before Brent breaks below $60 again."

Brent crude for February delivery was 21 cents higher at $61.39 a barrel at 0438 GMT (11:38 p.m. EST), after settling up $1.17 on Wednesday.

OPEC members which backed an output cut at the group's meeting last month are coming around to the view of Saudi Arabia that they need to focus on market share, further reducing the chance of any action to defend prices.

"The producers have not blinked. We are just watching and selling oil at whatever the price is," said a delegate from an OPEC country which in November had wanted an output cut.

U.S. crude for January delivery, which expires after Friday's settlement, was up 8 cents at $56.55 a barrel. The contracts rose as high as $58.98 on Wednesday after weekly U.S. government oil data showed a big build in crude stockpiles at the Cushing oil hub.

U.S. oil was also supported by the Federal Reserve's upbeat assessment of the economy after sending strong signals it was on track to raise interest rates next year.