Oil bounces off 6-year lows to close at $43.30 a barrel

Crude oil inventories down 1.7 million barrels
Oil bottoms out as low as $30: Kilduff
Demand cut worries crude traders

Oil closed higher on Wednesday as a weaker dollar and lower U.S. crude stockpiles provided a modest bounce off six-year lows hit the previous session, when worries about China's plummeting currency and economic slowdown sank prices.

U.S. light crude oil settled up 22 cents, or 0.5 percent, at $43.30 a barrel, after gaining almost 80 cents at the session high. On Tuesday, the market fell $1.88, or more than 4 percent, to settle at $43.08 a barrel, its lowest close since March 2009.

Benchmark was up 53 cents a barrel at $49.70, after a session high at $49.91.

Concerns that U.S. inventories could build again from higher crude imports and refinery outages kept a lid on the rebound. Prices rose less than 1 percent after Tuesday's 4 percent slump.

"The market needed a big drawdown to reverse the current trends and didn't get it," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.

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Crude stockpiles in the United States fell by 1.7 million barrels last week, just short of market expectations for a draw of 1.8 million barrels, data from the Energy Information Administration (EIA) showed.

Gasoline inventories also fell, by 1.3 million barrels versus the 647,000 barrels forecast.

China's announcement = bearish for oil

The dollar fell more than 1 percent against a basket of other currencies, pulled down by doubts over whether the U.S. Federal Reserve will raise interest rates after China's currency devaluation drove the yuan to a four-year low.

China is the world's biggest oil consumer after the United States and a weaker yuan erodes its purchasing power for dollar-denominated imports.

Read More$30 oil coming sooner than you think: Kilduff

The International Energy Agency said low fuel prices were stimulating global demand for oil but recovery was slow.

"While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016," the Paris-based energy watchdog said.

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Outages at refineries operated by BP in Whiting, Indiana, and Phillips 66 in Linden, New Jersey are weighing on market sentiment. The Whiting plant's 240,000 bpd crude processing unit will take at least a month to repair. The powerformer at the 238,000 bpd Linden refinery, which produces products used in blending gasoline, is expected to be shut a couple of weeks.