Oil rose more than $1 a barrel on Wednesday after a U.S. government report showed a surprise draw in commercial distillate stockpiles and equities markets rallied.
U.S. light crude for May delivery rose $1.32 a barrel to $50.47 by 2 p.m. EDT, down from a high of $51.30 earlier in the session. London Brent crude rose $1.72 to $52.94.
The gains came after the U.S. Energy Information Administration reported crude oil inventories rose 1.7 million barrels last week to a fresh 16-year high, in line with expectations. Stockpiles of distillates like diesel and jet fuel dropped more than expected.
The big distillate draw is a big surprise and shocked everybody and that has a lot to do with crude turning to the upside here, said Mark Waggoner, president of Excel Futures in Huntington Beach, California.
Demand for distillates, the primary fuel of industry, has been soft due to the ailing economy. Over the past four weeks, demand for the fuel was down 7.2 percent from a year earlier.
Analysts said the relatively modest crude oil build of 1.7 million barrels in the EIA data was also supportive because it was far smaller then the 6.9-million-barrel increase reported Tuesday by industry group the American Petroleum Institute.
The data is receiving a bullish response off the early lows since the EIA's crude stock build of 1.7 million barrels was considerably smaller than that of the API, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
A drop in oil stockpiles at the NYMEX delivery point in Cushing, Oklahoma, also added strength, he added.
Oil prices also got a boost from a rally in stock markets, analysts said, continuing a trend in which commodities have been closely tracking Wall Street.
Outside markets continue to trump weekly data as the commodities take their cue from global equity markets, said Chris Jarvis, senior analyst at Caprock Risk Management in Hampton Falls, New Hampshire.
U.S. stocks gained Wednesday as government aid for some life insurers and the merger of two homebuilders offset news of a quarterly loss from aluminum maker Alcoa
Adding support, the U.S. dollar fell on Wednesday, pressured by worries about the outcome of the U.S. earnings season.
(Additional reporting by Gene Ramos in New York and Chris Baldwin in London; Editing by Christian Wiessner)