Crude oil prices offset several sessions of steep declines with an early Wednesday morning rally on reports of a surprise draw on U.S. crude oil inventories.

Investors keep close tabs on U.S. supply and production data as it's the largest economy in the world and among the lead oil consumers. The American Petroleum Institute late Tuesday reported U.S. crude oil inventory levels dipped by 531,000 barrels, a surprise given previous estimates of a 3.5 million barrel build for last week.

After reeling for several sessions on concerns of a lingering glut and rising U.S. crude oil production, markets bounced sharply higher about a half hour before the start of trading in New York.

The price for Brent crude oil was up 1.7 percent to $51.77 per barrel, after threatening to drop back under $50 per barrel in the previous session. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 1.8 percent to $48.58 per barrel.

"Crude oil is back on a supply side drive after the API reports an oil supply drop, perhaps signaling that last week's massive crude oil supply increase was a fluke," Phil Flynn, a senior market analyst for the PRICE Futures Group, said in an emailed note.

Gains in U.S. oil production were triggered by the increase in crude oil prices that followed a production agreement from members of the Organization of Petroleum Exporting Countries. U.S. shale oil basins, which are costly to produce, have been more resilient to weaker oil prices than expected, giving traders cause for concern about a lopsided market.

The International Energy Agency said Wednesday that those traders waiting for the market to balance need to be patient as the glut persists during the early stages of the OPEC-led correction effort. Nevertheless, the IEA said there will be a catch-up phase moving forward and some of the supply-side pressures will start to wane, provided there are no economic or global energy shocks.

Tamas Varga, an analyst with the broker PVM, said in an emailed report there was some lingering pessimism given the steady presence of abundant supplies on the market. Bullish positions will only come to fruition if OPEC stays on track, which might be possible only if the group extends or improves on its current supply agreement.

Formal supply and production data from the U.S. Energy Information Administration is out later this morning. If it confirms API data, it would mark the first draw on U.S. crude oil stockpiles in 10 weeks.

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Russia reacts to steep drop in oil prices
Washington (UPI) Mar 14, 2017
The dramatic drop in crude oil prices is in large part because of "aggressive" output in the United States, but OPEC still factors in, a Russian minister said. Crude oil prices declined 5 percent Wednesday after a federal U.S. report revealed dramatic gains in crude oil storage and production levels. The U.S. shale oil boom that evolved over the last decade put negative pressure on crud ... read more

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