Oil pares gains after early jump to $63

By David Sheppard

LONDON (Reuters) - Brent crude pared early gains on Thursday to trade back below $62 a barrel, giving up much of a 3 percent spike in London as traders assessed whether a price rout is done.

Oil this week slumped as low as $58.50 and has almost halved since June as fast-growing U.S. shale output overwhelms demand, with losses accelerating after producer group OPEC decided not to cut output at its meeting last month.

But signs that lower prices are threatening future production have given some traders pause, helping the market recover in the last two sessions. Oil briefly spiked as much as 6 percent on Wednesday as players rushed to close short positions.

At 1511 GMT on Thursday, Brent for February delivery was 64 cents higher at $61.82, paring gains after hitting an intraday high of $63.70 early in the session. It is still up almost 6 percent since Tuesday's five-year low.

U.S. crude for January delivery, which expires after Friday's settlement, was up 26 cents at $56.73 a barrel.

"It looks like investors favour support around $60 a barrel," said Daniel Ang, an investment analyst at Phillip Futures in Singapore, adding that lower investment in production could be felt in the market as early as the second quarter of 2015.

Chevron Corp has put a plan to drill for oil in the Beaufort Sea in Canada's Arctic on indefinite hold, while Marathon Oil cut its capital expenditure for next year by about 20 percent.

Canadian oil producers also deepened cuts in 2015 spending, as Husky Energy, MEG Energy and Penn West Petroleum joined those hacking back capital budgets.

The oil minister of top OPEC producer Saudi Arabia said on Thursday he believes the drop in prices will be short-lived as demand for crude picks up.

"I am optimistic about the future, what we are facing now and what the world is facing is a temporary situation and will pass," Ali al-Naimi was quoted by state news agency SPA as saying.

OPEC members that backed an output cut last month are coming around to the Saudi view that they need to focus on market share.

"We are just watching and selling oil at whatever the price is," said a delegate from an OPEC country that had wanted an output cut in November.

Saudi Arabia, which opposed cutting output, raised exports in October to 6.9 million barrels per day from 6.7 million bpd in September, data showed.

(Additional reporting by Jacob Gronholt-Pedersen in Singapore; Editing by Michael Urquhart)