Investing.com - West Texas Intermediate oil futures extended gains on Wednesday, after data showed that oil supplies in the U.S. fell unexpectedly last week.
Crude oil for delivery in February on the New York Mercantile Exchange surged $1.25, or 3.46%, to trade at $37.39 a barrel during U.S. morning hours. Prices were at around $37.03 prior to the release of the inventory data.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories decreased by 5.9 million barrels in the week ended December 18. Market analysts' expected a crude-stock gain of 1.1 million barrels, while the American Petroleum Institute late Tuesday reported a supply drop of 3.6 million barrels.
Total U.S. crude oil inventories stood at 484.8 million barrels as of last week, remaining near levels not seen for this time of year in at least the last 80 years.
Gasoline inventories increased by 1.1 million barrels, compared to expectations for a gain of 1.4 million barrels, while distillate stockpiles fell by 0.7 million barrels.
Despite recent gains, U.S. oil futures are still down nearly 32% so far this year amid worries over ample domestic supplies.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for February delivery tacked on $1.02, or 2.84%, to trade at $37.13 a barrel. A day earlier, prices fell to $35.98, a level not seen since July 2004.
Brent prices are on track to post an annual decline of 33% in 2015, as oversupply concerns dominated market sentiment for most of the year.
Oil futures have fallen sharply this month after the Organization of the Petroleum Exporting Countries failed to agree on output targets to reduce a glut of oversupply on global energy markets.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by OPEC last year not to cut production in order to defend market share.
Meanwhile, Brent's discount to the WTI crude contract stood at 26 cents, compared to a discount of 3 cents by close of trade on Tuesday.
U.S. crude has been firmer relative to Brent recently, on signs that the U.S. oil market is likely to grow tighter following Congress' decision to lift a 40-year old ban on domestic oil exports, while a global glut gets worse in 2016 due to soaring production in Saudi Arabia and Russia.
Oversupply issue will be exacerbated further once Iran returns to the global oil market early next year after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.
Market experts predict Brent's premium over U.S. crude to flip into a discount in the coming weeks. The gap between the two benchmarks is down over 95% since its 2015 peak reached earlier in the year.