Oil up after United States inventories drop

At 522.5 million bbl, crude stocks were the lowest since February.

"A bigger than expected drop in oil and fuel stocks received the initial bullish attention".

Analysts were expecting a drawdown of 900,000 barrels.

Saudi Aramco's decision to reduce oil supplies to Asia has seen prices rally again after recent declines.

The report will add to a debate about the effectiveness of the supply cut pact, which is expected to be extended when producers meet later this month.

Oil rose on Tuesday but faced headwinds from concern over slowing demand and the rise in US crude output that has shaken investors' faith in the ability of OPEC to rebalance the market. The twelve member states will be joined by Russian Federation, but USA production remains a concern. "For 2017, total U.S. liquids production is forecast to increase by 0.82 mb/d with crude oil contributing 0.6 mb/d", OPEC said.

Oil prices have plummeted from around $100 a barrel in 2014 to less than $50 now after a spike U.S. shale oil production.

"We saw the biggest draw in inventories for the year last week with stockpiles down more than 5 million barrels".

Prices have been under pressure from rising U.S. output and concerns that Opec and supportive nations such as Russian Federation could extend production cuts agreed a year ago. In addition, OPEC also sees more supply coming from non-member countries such as the United States.

Saudi Arabia notified several Asian refiners of its first cuts in crude allocations since OPEC's output reduction took effect in January.

All the experts are saying that U.S. data on crude production and inventories, along with monthly reports from the Organization of Petroleum Exporting Countries (OPEC) and the U.S. Energy Information Administration (EIA) this week, should give investors a clear picture of how quickly global crude inventories are falling, says CNBC.

OPEC's estimate of its oil production last month, compiled from five of six external data known as secondary sources, fell to 31.732 MMbpd, according to a person familiar with the matter.

An extension of the deal would push supply down even further in the second half of the year, the IEA's Neil Atkinson said at the Platts Crude Oil Summit in London on Wednesday.

US oil production has risen more than 10 percent since mid-2016 to 9.3 million bpd, the highest since August 2015 and close to the levels of top producers Russian Federation and Saudi Arabia.

Gasoline demand also perked, as USA gasoline futures were up 2.4% after the report.