Oil prices rose to five month highs above $56 a barrel on Wednesday as a surprise drop in U.S. gasoline inventories and a slowdown in private sector job losses in April boosted hopes for a turnaround in the economy.
U.S. light crude for June delivery settled at $56.34, up $2.50, the highest settlement since November 14, 2008, when the front month ended at $57.04.
London Brent crude settled at $56.15 a barrel, up $2.03.
U.S. private sector job losses slowed in April as employers cut 491,000 from the salary rolls versus an expected loss of 650,000, a signal that the economy may be on its way to recovery, according to a report by ADP Employer services.
Recent 'light at the end of the tunnel' data in terms of the economic recovery has translated into a modest price recovery in the complex, independent of any fundamental statistics, which are still on the 'dark side', said Jay Levine, a broker at Enerjay LLC in Portland, Maine.
U.S. gasoline stocks declined unexpectedly last week, falling 200,000 barrels to 212.4 million barrels, the Energy Information Administration said on Wednesday.
The data showed U.S. crude inventories rose again last week, up 600,000 barrels to a fresh 19-year high of 375.3 million barrels, a smaller build than analysts had expected.
Today's numbers weren't as bearish as market expectations, and since the recent rally is based on the economic picture improving, so too are prices, Levine said.
Further support came as the Dow and S&P 500 rose on Wednesday, led by bank shares, after media reports suggesting some major banks, including JP Morgan Chase & Co
Oil prices have risen from lows around $33 this winter, driven higher by stronger equity markets and hopes the economy may begin to pull out of recession soon.
Slumping demand and growing stockpiles sent crude off record peaks over $147 a barrel struck in July of last year.
Around 100 million barrels of crude oil and 25 million barrels of products are estimated to be floating at sea on giant tankers as supply outstrips demand.
The Organization of Petroleum Exporting Countries last year agreed to a series of output cuts to help soak up excess supply and support oil prices.
The oil minister of OPEC member Venezuela said on Wednesday that the organization is seeking a minimum oil price of $70 a barrel and that OPEC production cuts have helped increase oil prices.
The head of Saudi Arabia's state oil company Saudi Aramco, Khalid al-Falih said on Wednesday the kingdom was currently pumping under 8 million barrels per day (bpd), below its OPEC target.
(Additional reporting by Eileen Moustakis in New York and Christopher Baldwin in London; Editing by Christian Wiessner)