US crude settles at $47.83, up 1.1%, continuing rally on signs market is tightening

An oil pump jack in Gonzales, Texas.
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Oil prices rose more than 1 percent on Thursday, as large drawdowns in U.S. inventories and growing support for continued OPEC output cuts boosted confidence that a seemingly insurmountable glut might finally diminish.

Brent rose 50 cents, or 1 percent, higher at $50.72 a barrel by 2:38 p.m. ET (1838 GMT). U.S. light crude oil settled Thursday's session 50 cents, or 1.1 percent, higher at $47.83.

U.S. crude stockpiles posted their biggest weekly drawdown since December as imports dropped sharply, while inventories of refined products also fell, the U.S. Energy Department said Wednesday.

"People are hinging the optimism today on the recent drawdown in inventories and I think that might last as long as we don't have another inventory build," said Stewart Glickman, head of energy research at CFRA Research in New York.

Oil up a bit as market opens
Oil up a bit as market opens

In recent days major producers have voiced support for extending last year's deal from the Organization of the Petroleum Exporting Countries and other producers to cut supply.

Iraq and Algeria said they were in favor of extending that deal, which cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

OPEC meets on May 25 to decide on production policy for the second half of 2017, and most analysts expect the group to extend cuts until at least the end of the year.

OPEC has reduced production as promised, but there have been few signs so far that supply has fallen significantly as producers have shielded many key customers, especially in Asia, from cuts.

But reports surfaced this week that Saudi Arabia has notified several Asian refiners of its first cuts in crude allocations since OPEC's output reduction took effect in January. Saudi Aramco will reduce supplies to Asian customers by about 7 million barrels in June.

"OPEC and non-OPEC members have shown commitment to production cuts and an extension of the agreement ... will assist in drawing stocks over Q3 and stabilising the market," BMI Research said in a note.

Cramer's charts show why oil prices have not yet bottomed
Cramer's charts show why oil prices have not yet bottomed

On Thursday, non-members Turkmenistan and Equatorial Guinea said they would join the cuts, though they are smaller producers. Equatorial Guinea, which is Africa's third largest oil producer, said it had support from Saudi Arabia to join OPEC.

In a report on Thursday OPEC announced group production was down in April. Saudi Arabia's production was higher, although Riyadh continues to produce less than agreed under the deal.

In addition, OPEC also sees more supply coming from non-member countries such as the United States. The cartel raised its estimate of total oil supply growth from non-OPEC producers this year to 950,000 bpd from a previous forecast of 580,000 bpd.

U.S. oil production continued to rise, jumping above 9.3 million bpd last week, the highest since August 2015.

— CNBC's Tom DiChristopher contributed to this report.