Oil prices surged 5 percent on Tuesday, the biggest daily gain since April, as investors' covering of short positions and a technical rebound helped lift the market off two-month lows, Reuters reported.
A rally in global equity markets to record highs added to the upbeat sentiment in oil, while the dollar fell, making greenback-denominated oil more attractive to holders of the euro and other currencies. [MKTS/GLOB] [.N] [USD/]
Expectations were high, too, that trade data due later in the day would show an eighth straight week of declines in U.S. crude stockpiles.
"The market's gotten really short over the past two weeks with everyone focused on weaker fundamentals and now you're seeing sudden covering," said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.
Brent crude futures settled up $2.22, or 4.8 percent, at $48.47 per barrel.
U.S. crude's West Texas Intermediate futures rose $2.04, or 4.6 percent, to settle at $46.80.
The biggest advance in a session since April 8 propelled both benchmarks from two-month lows on Monday when Brent tumbled to $45.90 and WTI $44.42.
A selloff had started last week after U.S. crude and gasoline inventory levels pointed to weak demand. A higher count for U.S. oil drilling rigs and fewer bullish bets by hedge funds also weighed.
"This certainly appears to be a technical correction. My call was for WTI to test $44.35 and we had almost gotten there," said Troy Vincent, analyst at New York-based energy data provider Clipperdata. "Also, I think the market is hesitant to move nearer to $40 support so quickly in the middle of summer."
Oil was also supported by producer group OPEC's optimism that the market was likely to achieve balance in supply-demand by next year. The U.S. government's Energy Information Administration (EIA) in a separate report, raised its forecast for U.S. oil demand growth in 2017. [OPEC/O]
Even so, the pace of the rally stunned some market participants. Oil was just about 2 percent higher in New York's morning trade.
"The sharper move up caught everyone by surprise," said a crude futures broker.
The rally came ahead of a report on U.S. crude stockpiles due from trade group American Petroleum Institute (API) at 4:30 p.m. EDT (2030 GMT). A Reuters poll forecast U.S. crude stockpiles fell 3 million barrels last week, declining for an eighth week in a row.
The EIA will issue official inventory data on Wednesday.