Crude Oil Prices Find Temporary Relief

Brent crude oil prices found a floor on Thursday after several companies cut their future investment plans due to declining prices. The commodity traded at $61.35 at 8:15 GMT, temporarily breaking its downward trend.

CNBC reported that several companies are cutting their capital expenditure in order to cope with lower oil prices. Chevron Corporation CVX announced that it has put a drilling project in the Beaufort Sea on hold, and Marathon Oil Corporation MRO decreased its spending in 2015 by 20 percent. Several Canadian oil companies are also lowering their capital expenditure next year including Husky Energy, MEG Energy and Penn West Petroleum.

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Analysts see the cuts giving crude prices a boost in mid-2015, but many believe the current price floor is only temporary. Despite the growing supply glut, production around the world remains strong and demand lackluster. With those fundamentals, Brent is likely to sink below $60 again unless something changes.

Brent prices also found some support from the U.S. Federal Reserve’s policy statement on Wednesday. The bank’s forecast for the No. 1 oil consuming nation’s economy in 2015 was encouraging, which indicates a healthy crude appetite. The bank also suggested that it was ready to raise interest rates, though not immediately. Fed Chair Janet Yellen said the bank will likely maintain the current interest rate for “a couple” more meetings.

However, OPEC producers are looking less and less likely to make a cut to their production, something many believe is the only thing that could get prices back on track. After the cartel elected not to cut down on its output in November, several of its members continued to push for a cut. Now, those producers are all but silent, instead backing the idea that accepting low prices will allow them to gain market share. Without any prospect of an output cut, Brent prices will likely continue to decline.