Oil jumped more than 3% at the high on Wednesday as traders eyed deeper production cuts from OPEC, and as China reported the lowest number of new coronavirus cases since the end of January, easing concerns about a drop-off in demand for oil.
"The market is keeping a close watch on the possible move by Russia and its oil companies to get on-board with the proposal to deepen the OPEC+ production cuts," Again Capital's John Kilduff said to CNBC. "The companies seem to be willing to extend the time frame of the deal, but not deepen. Any cooperation is a positive, however."
On Wednesday U.S. West Texas Intermediate crude gained 2.46%, or $1.23, to settle at $51.17 per barrel, its best day since Jan. 3. Brent crude rallied 3.3%, or $1.78, to settle at $55.79 per barrel. Earlier in the session WTI traded as high as $51.73, while Brent reached $56.26.
In a closely-watched monthly report published Wednesday, OPEC cut its forecast for oil demand growth this year, saying the coronavirus outbreak was the primary reason.
The cartel said it now expects 2020 daily oil demand growth to be 990,000 barrels per day (bpd), which is 230,000 bpd below prior forecasts.
This, in turn, could encourage OPEC and its allies, known as OPEC+, to implement additional production cuts.
"The impact of the Coronavirus outbreak on China's economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020," OPEC said in the report.
An OPEC+ technical committee last week recommended expanding production cuts to put a floor under falling oil prices, although there was some resistance from Russia.
RBC's global head of commodity strategy Helima Croft said that oil's move higher is "signs that we are getting close to Russia signing off on the OPEC+ deeper cut."
Prices also got a boost as China announced a slowdown in the number of new coronavirus cases.
On Tuesday night China's National Health Commission said there were 2,015 confirmed new cases of the coronavirus on the mainland and 97 additional deaths, bringing the total numbers to 44,653 confirmed cases and 1,113 deaths.
FundStrat's Tom Lee said in a note to clients Wednesday that prices were "boosted as worries ease over coronavirus disease's hit to crude demand," while Kilduff said "the ebbing fears over the coronavirus outbreak are another positive" for oil.
Despite Wednesday's bounce, WTI and Brent are still trading in bear market territory.
"The near-term trend remains bearish right now as lingering concerns about the coronavirus continue to weigh on energy market sentiment," Sevens Report found Tom Essaye said Wednesday.
Some of oil's gains were pared, however, after the U.S. Energy Information Administration reported a larger-than-expected inventory build for the week ending Feb. 7. Stockpiles rose by 7.5 million barrels, ahead of the 3.2 million barrel build analysts had been expecting, according to estimates from FactSet.
- CNBC's Michael Bloom, Patti Domm and Sam Meredith contributed reporting.