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 Oil has gained more than 15 percent since Thursday after data
showed the number of U.S. drilling rigs had fallen the most in a
week in nearly 30 years. Some investors are betting a floor has
formed under the market's seven-month-long rout.
BP Chief Executive Bob Dudley, tempered expectations of lower
production, however, when he said on Tuesday that he expected U.S.
oil output to rise until the summer of 2015 when it would flatten.
Brent crude oil futures <LCOc1> were up $2.13 cents at $56.88 a
barrel as of 1143 GMT. U.S. WTI futures were at $51.33 a barrel, up
$1.76 cents.
BP announced it would cut capital expenditure by 13 percent to $20
billion in 2015. Last week, Chevron <CVX.N> announced a 13 percent
cut in capital expenditure to $35 billion.
 The announcement of capital expenditure cuts by major oil companies
are helping support prices, said Michael Hewson, chief market
analyst at CMC Markets.
"We've seen a lot of oil companies announce significant cuts in
capacity expenditure and reductions in rig counts. What you're
getting at the moment is a paring back of expectations as a result
of the measures being taken," Hewson said.
"The seeds of an oil price recovery are being sown," Bernstein
analysts said in a note, warning of downside risk to oil supply in
places such as the Gulf of Mexico, the North Sea and Brazil, as
companies cut costs in response to a fall of up to 60 percent in oil
prices since mid-June.
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"Supply is unlikely to match expectations and demand will recover
from last year's lows," the analysts said.
Others warned against getting too excited about falling rig counts
in the United States. Analysts at Morgan Stanley said the
relationship between rig count and production can be deceptive.
"Headline rig count declines may look impressive, but as we look at
the data, much of the drop in oil rig count has come in low yielding
vertical or directional rigs, i.e. the low-hanging fruit," they
said.
Two OPEC delegates, one from a Gulf producer, said they could not
rule out oil prices dropping to as low as $30 to $35, due to weak
demand combined with global refinery maintenance in the first and
second quarters of 2015.
(Additional reporting by Jacob Gronholdt-Pedersen and Henning
Gloystein in Singapore; editing by William Hardy)
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