Lower spending may be pushing oil higher

Crude oil prices gained traction in Wednesday trading as U.S. federal data show spending on exploration and production was down by double digits.

Global oil prices are about half of what they were in June 2014, dropping more than once this year below the $50 per barrel mark. The steady drop in crude oil prices has forced energy companies to cut back on staff and reduce the amount of capital set aside in their 2015 budgets for exploration and production, known as the upstream side of the sector.

A daily brief from the U.S. Energy Information Administration finds spending on exploration and production during the fourth quarter of 2014 was down 12 percent year-on-year. EIA said the impact of the spending cuts might not be felt for a long time.

"The effects [of reduced spending] may not be immediate, as some projects can have lead times of many years," the brief read. "However, if the trend continues, future production growth could be lower than originally anticipated."

The 100 rigs deployed in North Dakota, a state at the heart of the shale oil boom, is about half the number active one year ago. State data from January show oil production at 1.19 million barrels per day, down 2.5 percent from the all-time high reported in December.

There were 156 active rigs reported in the state in January.

EIA's assessment could signal a shift in a market that's been weighted toward the supply side because of the glut of oil from the United States. That scenario, coupled with a decision from the Organization of Petroleum Exporting Countries to keep its output stable, helped drive oil prices well below the $100 per barrel mark.

The price for West Texas Intermediate, the U.S. benchmark, was up modestly in early Wednesday trading to around $47.70, almost 10 percent above the six-year low set earlier this month. Brent crude oil prices continued pulling further away from the U.S. benchmark, gaining nearly a full percentage point to $55.60 per barrel.