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Oil settles at $47.33, surging 3.2% on big drop in US crude stockpiles

Oil prices rose on Wednesday, bolstered by the biggest one-week drop in U.S. inventories so far this year, and after Iraq and Algeria joined Saudi Arabia in supporting an extension to OPEC supply cuts.

Concerns about rising output from the United States, Libya and Nigeria continue to weigh on markets, however, and some analysts questioned whether the sharp rebound following the U.S. government figures would be sustained.

The U.S. Energy Information Administration said U.S. crude inventories fell by 5.2 million barrels last week, which was more than the 1.8 million-barrel slide analysts predicted. Gasoline and distillate stocks also fell, supporting a market that has sold off sharply in recent weeks due to persistently high U.S. inventories.

U.S. light crude oil ended Wednesday's trade $1.45, or 3.2 percent, higher at $47.33 a barrel. Global benchmark Brent crude was up $1.44, or 3 percent, at $50.77 a barrel by 2:34 p.m. ET (1834 GMT).

Gasoline demand, which has been soft in recent weeks, also rebounded. U.S. gasoline futures were up 3.4 percent after the report, having fallen more than 12 percent in the last four weeks.

But some market watchers remained skeptical.

"U.S. crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak," said John Kilduff, partner at hedge fund Again Capital in New York.

"It is difficult to see how the day's gains last."

Brent and U.S. light crude futures contracts closed on Tuesday at their second lowest levels since Nov. 29, the day before OPEC announced it would cut output in the first half of 2017.

Prices surged after that deal, but have come under pressure in recent weeks as U.S. production has climbed, undermining OPEC-led efforts to balance supply with demand.

Also supporting prices were comments from Algeria's energy minister on Wednesday that Algeria and Iraq favor extending global supply cuts when OPEC meets later this month. On Monday, Saudi Arabia's oil minister Khalid al-Falih said he expected the output deal to be extended to the end of the year or possibly longer.

Some investors believe OPEC must not only extend the output cuts, but deepen them. But analysts told CNBC that is unlikely to happen.

State-owned Saudi Aramco will also reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of the Organization of the Petroleum Exporting Countries' deal to reduce production.

Aramco had previously maintained supplies to important Asian customers.

That report dovetailed with data from tanker tracking firm ClipperData last week, which showed Saudi crude oil loadings for export fell by about 670,000 barrels a day in April from October, the level against which OPEC measures its coordinated output cuts.

Questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying the country's production exceeded 800,000 barrels per day (bpd) for the first time since 2014 and could rise to 1.2 million bpd later this year.

Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon as Shell tests the Trans Forcados oil export pipeline before it restarts.

— CNBC's Tom DiChristopher contributed to this report.