The price of the black stuff lifted more than one per cent today as Saudi Arabia started talks to support an Opec-led production cut and a report showed the amount of oil the US keeps in reserve fell last week.
Global benchmark Brent crude was up 1.5 per cent, or $0.83, to $57.29 a barrel in London afternoon trading, while US sweet crude was also up 1.5 per cent, or $0.80, to $54.06.
Saudi Arabia has started talks with customers about a reduction in crude sales to bolster a plan from the Organisation of the Petroleum Exporting Countries (Opec) to lower daily output by 1.2m barrels per day (bpd) and plug a glut of global supply.
The Gulf state has taken a bulk of the cuts in the consortium's deal – the first for eight years. In November, when the agreement was finalised, Saudi Arabia agreed to cut domestic output by 486,00 bpd, or almost five per cent of its October output of 10.5m bpd.
US crude was also bolstered by support from data released last night by the country's primary oil body, the American Petroleum Institute (API), which showed crude inventories fell by 7.4m barrels last week.
Markets closely watch the weekly inventory data. Official US inventory data will be released later today, which could cause prices to rise further if it confirms the API's registered fall.
"Both oil contracts managed to bounce back on Wednesday after suffering big drops in the first trading day of the year," said Fawad Razaqzada, market analyst at Forex.com.
"Tuesday’s sell-off took most people by surprise as there was no fundamental news behind the move. It was likely triggered by a general “risk-off” trade that also caused stocks to decline. Crude oil has been boosted in part by the surprisingly large drawdown in US oil stocks, as reported by the American Petroleum Institute. According to the API, oil inventories fell by a good 7.4m barrels last week, much more than expected"