Brent steady above $61 as companies cut upstream investments

By Reuters

Dec 18, 2014 05:22 AM EST

Brent crude held steady above $61 a barrel on Thursday, bringing a sharp drop in prices to a temporary halt as companies are forced 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 indefinite hold, while Marathon Oil cut its capital expenditure for next year by about 20 percent.

Canadian oil producers also deepened cuts in 2015 spending, 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 on 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 next year's second quarter.

"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 16 cents higher at $61.34 a barrel by 0759 GMT (02:59 a.m. EST), after settling up $1.17 on Wednesday.

"The move certainly wasn't driven by fundamentals," analysts at ANZ said in a note about Wednesday's price rebound.

"Most likely, the 25 percent fall over the past month has been overdone, with some investors positioning for a rebound."

OPEC members who 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 had wanted an output cut in November.

U.S. crude for January delivery, which expires after Friday's settlement, was up 4 cents at $56.50 a barrel. The contracts rose as high as $58.98 on Wednesday, after weekly U.S. government data showed a big build in crude stockpiles at the Cushing oil hub. <EIA/S>

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.

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