US crude settles 81 cents higher at $48.79 per barrel

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U.S. crude for September delivery settled 81 cents higher at $48.79 a barrel Wednesday after rallying as much as 2.5 percent from six-month lows earlier in the session.

Crude oil futures closed in on $50 following a bullish inventory report from the Department of Energy and after Dow Jones reported that Saudi Arabia would be pulling back oil production after the summer.

Futures briefly jumped after the Federal Reserve announced Wednesday afternoon it would continue to hold interest rates near zero, but oil prices soon gave back those gains and more.

Crude futures have lost more than $10 a barrel since early June on fears that peak summer demand for gasoline in the United States was not enough to offset a growing global glut in oil supply. A resurgent dollar's impact on commodities and a stock market tumble in No.1 energy consumer China also contributed to the decline.

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However, the latest data from the U.S. Energy Information Administration showed a 4.2 million-barrel draw in crude stockpiles last week, more than 20 times analysts' expectations for a decrease of 184,000 barrels. That indicated demand for energy may have been stronger than some thought.

The draw diverged sharply from the prior week's inventory build, which drove stockpiles above a five-year seasonal average.

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The EIA also reported that U.S. gasoline demand was up 6.2 percent from the year-ago period, averaging 9.51 million barrels per day (bpd) over the past four weeks.

"Although just one data point, the latest weekly data may have been enough to provide some support in the face of major headwinds for oil prices," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.

The Dow Jones report citing sources said that Saudi production, which peaked at 10.6 million bpd in June, would fall to 10.3 million bpd and that production would "hover around" 10 million bpd through the end of 2015.

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At first glance, a production cut by Saudi Arabia appears to be supportive of prices—if not bullish. But traders and analysts began questioning its significance just as soon as the headline came out.

"The world produces 91 million barrels per day, demand is 89 million barrels, so there's the disparity that has beaten down prices," said Anthony Grisanti, President of GRZ Energy. "A production cut of 300 [thousand] to 600,000 barrels a day by Saudi Arabia is only a drop in the bucket at this point."

Front-month Brent futures were up 6 cents at $53.36 a barrel by 2:34 p.m. EDT, having recovered from an intraday low of $52.51.

U.S. crude's discount to Brent was at its narrowest in three weeks, a sign of its better fundamentals after the EIA data.

Wednesday's rebound was not as great as the selloff in oil over the past few sessions that pulled prices to near six-month lows. Brent traded at an early February low of $52.28. U.S. crude fell to $46.68 in the previous session, the lowest since March.

"It's all a matter of expectations," said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington. "Given the vast majority of bearish pronouncements on crude over the past few weeks, any sort of draw was likely to elicit a response like this."

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A mounting global surplus of oil has stripped about 8 percent off crude futures so far this year. Notwithstanding the weekly U.S. stock draw, the build in global inventory is showing few signs of reversing.

A Reuters survey on Tuesday showed members of the Organization of the Petroleum Exporting Countries produced around 3 million bpd of oil more than daily demand in the second quarter.

—CNBC's Jackie DeAngelis and Tom DiChristopher contributed to this report.