Oil prices inched towards $50 a barrel in early Asian trade on Thursday, after U.S. government figures showed a sharper-than-expected drawdown of crude stocks last week as imports dropped, Reuters reported.
Buoyant stock markets also supported prices, with the Dow Jones industrial average .DJI, the S&P 500 .SPX and the Nasdaq Composite .IXIC all climbing overnight.
But gains in oil were capped as the U.S. dollar hovered near an eight-week high against a basket of currencies .DXY.
U.S. crude futures CLc1 had risen 5 cents to $49.61 a barrel by 0045 GMT. They settled the last session 94 cents higher, after marking a seven-month high of $49.62.
Brent LCOc1 climbed 5 cents to $49.79 a barrel, having closed up $1.13, or 2.3 percent, in the previous session.
"I wouldn't be surprised to see the rally extend a bit further," said Ric Spooner, chief market analyst at Sydney's CMC Markets.
"There's a decent chance it will breach $50 a barrel (later on Thursday)."
U.S. crude stocks fell 4.2 million barrels to 537.1 million in the week to May 20, the steepest weekly drop in seven weeks, the U.S. Department of Energy's Energy Information Administration said on Wednesday. [EIA/S]
That was larger than analyst expectations of a 2.5 million barrel fall, but not as much as the 5.1 million expected by trade group, the American Petroleum Institute.
Gasoline stocks rose 2 million barrels to 240.1 million barrels against forecasts of a 1.1 million-barrel drop, the EIA said.
Stockpiles of distillates, which include diesel and heating oil, declined by 1.3 million barrels to 150.9 million, according to the EIA.
Crude oil imports fell 4.7 percent to 7.3 million barrels per day last week, the EIA said.