NEW YORK (Reuters) - Oil rose about 1 percent on Tuesday on a boost from Wall Street and expectations of a drawdown in U.S. crude inventories, then prices jumped another 1 percent after settlement to nearly $50 (£34.2) a barrel after an industry group suggested the draw was larger than expected.
Data from the American Petroleum Institute (API) showed U.S. crude inventories fell 5.1 million barrels last week, double the expectations of analysts polled by Reuters. [API/S]
The market will watch for confirmation of the big draw when the U.S. Energy Information Administration (EIA) issues official inventory numbers on Wednesday.
The rally in crude prices could push prices beyond the $50 long targeted by market bulls.
"The crude numbers are certainly bullish to an extent, reflecting the supplies lost from the Canadian wildfires," said John Kilduff, partner at New York energy hedge Again Capital. "We could certainly test $50 anytime now, even close above that, if the EIA data turns out to be as supportive."
The API also reported higher gasoline inventories which could pressure prices, but traders said the market would probably focus more on the crude drawdown.
U.S. crude's West Texas Intermediate (WTI) futures CLc1 settled up 54 cents, or 1.1 percent, at $48.62 a barrel. After the release of the API data, it got to as high as $49.27 by 4:58 p.m. EDT (2058 GMT) in post-settlement trade.
Brent crude futures LCOc1 finished up 26 cents, or 0.5 percent, at $48.61, ending a four-day slide. It reached $49.24 in after-hours trade.
U.S. equities surged, giving oil a further lift, as investors grew more comfortable with the possibility that the U.S. Federal Reserve might soon raise interest rates. [.N] Crude buyers also seemed unfazed by a stronger dollar .DXY, which typically makes greenback-denominated oil costlier in other currencies. [USD/]
Earlier in the session, oil was supported by the drop in Iraqi oil output to 4.5 million barrels per day from January's record high of 4.78 million bpd.
Consultant IHS said just 2.8 billion barrels of oil were discovered outside North America in 2015 following a sharp fall in exploration and appraisal drilling. It was the lowest total since 1952. Morgan Stanley said in a separate report the figure would be 12.1 billion barrels if it included the United States.
"As spare capacity dwindles, the threat of a price spike increases," said Matt Smith, who tracks crude cargoes for New York-based Clipperdata.
Additional reporting by Simon Falush in LONDON; Editing by David Evans and David Gregorio