Oil rose 2.7% on Wednesday after government data showed a surprise draw in U.S. crude stocks and as the prospect of deeper output cuts by OPEC and its allies offered support.
U.S. crude stocks fell 1.7 million barrels last week as refineries hiked crude runs by 429,000 barrels per day (bpd) and oil imports fell, the Energy Information Administration said. Analysts had expected an increase of 2.2 million barrels.
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Oil prices had fallen earlier in the session on data on Tuesday from industry group the American Petroleum Institute showing U.S. crude stocks rising more than analysts had expected, by 4.5 million barrels to 437 million barrels.
The EIA's report "has put some buyers in the market, but it will be interesting to see if it lasts. While this will distract from demand destruction, the market will eventually come back to it," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
The draw in U.S. oil stocks appeared to have been caused by temporary market factors including higher refinery runs, rather than a fundamental firming of oil demand, and investors are still concerned about the global economy following reports of slowing growth in China and Europe, McGillian added.
A larger-than-expected decline in U.S. gasoline stocks and lower net oil imports also supported prices, analysts said. Gasoline stocks fell by 3.1 million barrels, compared with analysts expectations of a 2.3 million-barrel drop.
"The continued decline in product inventory makes for a bullish report," said John Kilduff, a partner at Again Capital LLC in New York. "Gasoline numbers are summer-like; that's endemic of a good economy (in the U.S.) and people driving to work."
Net U.S. crude imports fell by 873,000 bpd to the lowest on record, while exports rose 435,000 bpd to a near record 3.7 million bpd, the data showed.
"No one really saw that coming because it came at a time when shipping rates were adding a considerable premium to the barrel," said Robert Yawger, director of energy futures at Mizuho.
Also helping to underpin prices, the Organization of the Petroleum Exporting Countries is mulling whether to deepen production cuts amid concerns of weak demand growth next year.
OPEC and other oil producers including Russia, a group known as OPEC+, have pledged to cut production by 1.2 million bpd until March 2020. OPEC and other non-members are scheduled to meet again Dec. 5-6.
"With the headwinds of strong U.S. producer hedging and high freight rates fading, we expect stronger Brent timespreads and higher prices in coming weeks, with upside risk to our year-end $62 per barrel forecast," Goldman Sachs said in a note.
The investment bank expects Brent prices to continue trading around $60 a barrel in 2020.