The American Petroleum Institute on Tuesday reported that crude inventories dropped by 5.14 million barrels last week, Bloomberg News reported. Data from the Energy Information Administration due later Wednesday are likely to confirm the fall in supplies.
There have been high expectations of a decline in stockpiles because of wildfires in western provinces of Canada, the biggest supplier of crude to the US market.
“Estimates suggested that output was reduced by over a million barrels per day. This is expected to be reflected when the US Department of Energy releases crude inventories tonight as the market eyes US$50 per barrel,” CMC Markets client services executive Alex Furber wrote in a note.
At about 0645 GMT, US benchmark West Texas Intermediate (WTI) for July delivery was up 78 cents, or 1.60 percent, trading at $49.40 a barrel, a new seven-month high.
European benchmark Brent North Sea oil was up 72 cents, or 1.48 percent, at $49.33 a barrel.
Crude prices have rebounded since plunging to near 13-year lows below $30 a barrel in February amid abundant global supplies. But they are still well short of peaks of more than $100 reached in June 2014.
There are concerns that a strong dollar — bolstered by talk of the Federal Reserve raising interest rates as soon as June — and Canadian producers coming back online may curb gains.
“Prices have been weighed down by a strong dollar, and glut concerns as production from top exporters increases,” Singapore’s UOB Bank wrote in a note to clients.
A stronger US dollar makes dollar-priced commodities like oil more expensive, curtailing demand.
Major exporter Iran has also vowed to keep up oil production after the lifting of Western sanctions in January.
Markets are now eyeing a June 2 OPEC meeting in Vienna where it is hoped a deal on reducing production can be reached.