The Organisation of Petroleum Exporting Countries (Opec) said it tightened its crude taps to cut nearly 800,000 barrels a day from its oil exports in January after vowing to drain excess oil from the oversupplied market. Forecasts for non-OPEC supply were lifted by an improved outlook for the Gulf of Mexico, while projections for global demand were lowered as a result of weakness in Europe and the Americas.
Brent crude, the global benchmark, was up $1.07, or 1.7 percent, at $63.49 a barrel at 9:55 a.m. EST (14:55 GMT), while U.S. West Texas Intermediate futures were up 91 cents, or 1.7 percent, at $54.01.
And while OPEC and its allies, including Russian Federation, withhold supply, United States output is expected to rise further, with the Energy Information Administration saying on Tuesday that U.S. crude production is expected to reach 13.2 million bpd by 2020.
Goldman Sachs said on Tuesday, "With so far no sign of change in government, we see increasing risks that production losses could be larger and sooner than our forecast for a 0.33 million-bpd supply loss in 2019".
Additionally, the International Energy Agency said energy market participants may be able to adjust to USA sanctions against Venezuela's crude industry.
The IEA further added that traders shouldn't expect US sanctions against Venezuela to fuel a rally in oil prices.
Oil descended into a bear market in November, a swift drop from four-year highs seen in October, as traders grew anxious over strengthening USA production and an outlook for softer global fuel demand.
If refiners are unable to source enough heavy and extra heavy crude, they will buy the next best alternative, in this case medium density crudes, so the impact of sanctions is rippling through the entire oil market.
United States prices were also supported by a report from the American Petroleum Institute (API) on Tuesday showing that crude inventories fell by 998,000 barrels in the week to 8 February to 447.2 million, compared with analyst expectations for an increase of 2.7 million barrels. Analysts were looking for a build of 508,000 barrels for the week.
Prices of the American reference for the sweet light crude oil are prolonging the recovery on Wednesday, trading at shouting distance from the $54.00 mark per barrel ahead of the EIA report.
"In terms of crude-oil quantity, markets may be able to adjust after initial logistical dislocations", said the Paris-based IEA, which advises major economies on energy policy. -China trade and broader economic concerns, and the approach of seasonal refinery maintenance.