Oil surges above $53 a barrel as more companies cut production

Oil surged above $53 a barrel on Tuesday, extending a four-day rally as BP became the latest oil giant to announce plans to cut exploration spending.

U.S. benchmark crude gained $3.48, or 7 percent, to $53.05 a barrel, its highest closing price this year, and has moved up about 19 percent in the past three trading sessions.

The sudden rally follows a months-long decline that knocked oil prices down about 60 percent since last summer.

The gains began Friday with a report showing a sharp drop in the number of rigs in the U.S. drilling for oil. On Monday, BP announced a 20 percent drop in capital spending for this year. That follows Chevron’s projected cut of 13 percent.

The market’s momentum faces some tests. The Energy Department issues its weekly report on U.S. supplies Wednesday. Analysts expect an increase of 2.8 million barrels, according to Platts. On Friday, the government puts out its latest report on U.S. employment.

Jim Ritterbusch, president of energy consultant Ritterbusch Associates, also noted that even though production in the U.S. won’t grow as much as previously expected, it will still proceed at a pace not seen for about three decades. And BP forecast an extended period of low oil prices.

Not everyone is convinced the slump in prices is over.

“The rig count has come down ... but I think it still has a ways to go,” said Matthew Kaufler, a portfolio manager at Federated Investors. “This is probably more of a ‘technical’ bounce than anything else.”

This story was originally published February 3, 2015 at 2:34 PM with the headline "Oil surges above $53 a barrel as more companies cut production."