Oil gains as hopes of price recovery amid cuts in production spending

By Samantha Sunne

NEW YORK (Reuters) - Oil prices were up about 2 percent on Wednesday on hopes of a recovery as energy firms cut production investments and alleviate the glut that has wiped out more than half its value in the last seven months.

OPEC's secretary-general and the International Energy Agency's chief economist both said they expected prices, currently near their lowest since 2009, to rebound later this year.

Total SA joined a raft of international oil companies, including BP and ConocoPhillips in slashing budgets due to lower prices. The French oil major said it would cut spending on U.S. shale production, raising hopes of a reduction in the oversupply of oil from the United States.

The cut is "headline-grabbing," analyst Matt Smith of Schneider Electric said, but it will be months before an actual reduction will manifest.

"Until that point, we're going to continue to be weighing OPEC's ongoing production versus these potential cuts in the U.S.," he said.

Turmoil in Yemen further added to the expectation of long-term recovery, said strategist Richard Hastings of Global Hunter Securities.

"At some point the instability in the region is going to encourage crude oil prices higher all over again," Hastings said. "And Yemen is the new chapter in that story."

Yemen's president was expected yield to demands from Houthi rebels after two days of battle with presidential guards, a move that Arab neighbors called a coup.

Brent rose 77 cents to $48.76 by 12:34 p.m. EST (1734 GMT), after hitting a session high of $49.59. U.S. crude was up $1.09 at $47.56, also down from high of $48.20, due to a slight rebound in the U.S. dollar.

The dollar pared losses after falling against a basket of currencies, possibly drawing crude prices down after morning rallies, Global Hunter Securities' Hastings said.

The dollar index was steady at 93.048 after falling to 92.151 as traders waited for the European Central Bank to announce a bond-buying program to support the European economy.

On the demand side, U.S. demand for gasoline, which is usually high in spring, may be higher than usual due to fewer refineries shutting for maintenance this year, IIR Energy said.

The American Petroleum Institute's weekly snapshot of supplies will draw more attention back to the U.S. supply glut, Schneider Electric's Smith said. The report is due late Wednesday, delayed by one day due to a holiday on Monday.

The more closely-watched U.S. government inventory report follows on Thursday. Crude stocks were expected to have risen 2.6 million barrels. [EIA/S]

(Additional reporting by Himanshu Ojha in London and Alex Lawler and Henning Gloystein in Singapore; Editing by Marguerita Choy)