Oil prices jumped more than 3 percent on Wednesday after the U.S. government reported crude inventories fell unexpectedly for the first time since March, adding to concerns over supply disruptions in Canada and Nigeria.
The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts' expectations for an increase of 714,000 barrels and the American Petroleum Institute's (API) build of 3.5 million barrels in preliminary data issued on Tuesday.
The EIA report "has been quickly viewed as bullish, with the crude draw just about exactly opposite to what API had," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Motor gasoline stocks also fell 1.2 million barrels, and distillate fuel inventories were down 1.6 million barrels.
International Brent crude oil futures were up $1.98, or 4.3 percent, at $47.51 per barrel. U.S. West Texas Intermediate (WTI) crude futures settled 3.5 percent higher, or $1.57, at $46.23, a six-month high.
Oil prices had seesawed earlier in the session. Supply disruptions in Nigeria were offset as Canadian energy firms tried to restart closed facilities.
Oil sands companies around the Canadian energy hub of Fort McMurray began to restart operations on Tuesday after an out-of-control wildfire forced a week-long shutdown. Provincial and industry officials said production in much of the region should ramp up soon.
The fires in Canada's oil sands field region have knocked out around 1.5 million barrels of daily crude production, leading to a significant tightening of global markets.
"We were not totally surprised with the draw after the shut-in in Canadian production," Tariq Zahir, trader and managing partner at Tyche Capital Advisors, New York, said, referring to the EIA report. "But while the fires have taken tar sands production offline, we believe this will not be a prolonged event."
The EIA, in a separate report on Wednesday, said it expected Brent to rebound in the next year to about $76 a barrel on continued increase in demand.
Royal Dutch Shell's Nigerian unit, Shell Petroleum Development Co (SPDC), said it had declared force majeure on Bonny Light exports following the closure of the Nembe Creek Trunk line (NCTL) for repairs after a leak.
This disruption to output will likely push Nigeria's production to its lowest in more than two decades, and follows a force majeure on the Forcados crude oil grade which is likely to last until June.
Production declines and disruptions in North America, Latin America, Asia, and elsewhere in Africa have also acted as a support to prices this week.
In a sign of an ongoing aggressive fight for market share, Iran has set its June official selling prices (OSPs) for heavier crude grades it sells to Asia at the biggest discounts to Saudi and Iraqi oil since 2007-2008.
Iran on Tuesday set the June OSP for Iranian Heavy crude at $1.60 a barrel below the Oman/Dubai average in the latest sign that producers especially in the Middle East are willing to accept low prices in return for market share.