Oil gained more than 4% on Wednesday, as a larger-than-expected drop in U.S. inventories and hopes of deeper production cuts from OPEC lifted prices.
U.S. West Texas Intermediate crude futures gained $2.33, or 4.2%, settling at $58.43 a barrel. It was WTI's third straight day of gains, and its best day since September. Brent crude futures gained $2.31, or 3.8%, to reach $63.14.
A surprise drop in stockpiles was among the factors pushing oil higher.
U.S. inventories decreased by 4.9 million barrels for the week ending Nov. 29, the U.S. Energy Information Administration said on Wednesday. That was more than three times the 1.4 million decrease that analysts polled by FactSet had been expecting.
Data from the American Petroleum Institute released Wednesday showed a drop of 3.7 million barrels, compared to estimates of a 1.7 million barrel decrease.
OPEC chatter
Oil also got a boost from talk of deeper production cuts.
OPEC's biannual meeting kicks off Thursday in Vienna, where the 14-member group will discuss the next phase of their oil production policy. On Friday, OPEC and its allies — known as OPEC+ and which includes Russia — will meet.
OPEC+ has cut output by 1.2 million barrels per day since the beginning of the year. The current deal runs through March of 2020.
Ahead of Thursday's meeting, Iraqi oil minister Thamer Ghadhban suggested that the members might be leaning towards steeper cuts, which would see production reduced by an additional 400,000 barrels per day.
But Rebecca Babin, a senior energy trader at CIBC Private Wealth Management, was quick to note that Wednesday's surge brings oil back to where it traded last week, before Friday's sell-off on comments from Russian Energy Minister Alexander Novak.
"This move essentially is re-calibrating crude prices to reflect lower odds that the deal is not extended and higher odds of deeper cuts," she said to CNBC.
While she attributed Wednesday's action to an increased probability of deeper cuts, she noted that it's not yet a given. "Iraq's credibility regarding additional output cuts could be questioned, as they have yet to comply with the original cuts imposed as part of the OPEC+ agreement," she said.
Earlier in Wednesday's trading session oil had pared some of its gains following a Dow Jones report that Saudi Arabia might boost production if other OPEC members do not comply with the current production cut stipulations. This followed a Reuters report on Monday that Saudi Arabia could be in favor of deeper cuts in order to give Aramco a boost as it hits the public market.
- CNBC's Sam Meredith contributed reporting.