Oil prices held above $50 a barrel on Wednesday following a 3% jump a day earlier on the back of Brazilian and Libyan supply worries, a U.S. pipeline outage and a general rally in riskier assets on hopes of more economic stimulus measures.
Brent and U.S. futures for December delivery rose slightly to $50.70 and $48.09 respectively by 1339 GMT (8.39 a.m. ET). Brent ended the last session $1.75, or 3.6 %, higher while U.S crude rose $1.76, or 3.8% on Tuesday.
WTI crude hit its highest since Oct. 13 during Tuesday's session after the U.S. Colonial Pipeline suspended operations due to flooding, on outage that came on top of a strike at Brazil's state oil producer Petrobras and the closure of the Libyan oil export terminal.
The Petrobras strike has slowed daily oil output by about 25% in the world's ninth biggest oil producer.
"While a few days of even 500,000 barrels per day of lost supply are clearly not an issue, a sustained outage of this magnitude heading into December when refinery runs reach a seasonal high could be a reasonably bullish factor," JBC Energy analysts said in a note.
Activity in China's services sector expanded at its fastest pace in three months in October thanks to stronger new business, a private survey showed on Wednesday, easing some concerns over economic weakness as manufacturing falters.
However, it was still not clear whether the services data would be a big enough boost to strengthen demand in the world's top consumer of energy, metals and other commodities.
"A year-end recovery in commodity prices remains unlikely with a stronger dollar and continued weak Chinese economic data," ANZ said in a note on Wednesday.
Longer term, oil prices are expected to recover as low oil prices are hurting the U.S. shale boom, thus helping the market to rebalance despite record high production volumes from the Organization of the Petroleum Exporting Countries.
"The market will rebalance ... Most people think oil will be back at $60-70 a barrel in the next couple of years," Ian Taylor, chief executive at Vitol, the world's largest oil trading company, told a conference in London.
The dollar index was stronger on Wednesday but global equities were also set for their third straight day of gains, buoyed by positive economic data and a pledge from the European Central Bank to ramp up stimulus if necessary.
A likely build in WTI crude inventories last week could weigh on sentiment later in the session.
Crude stocks rose by an estimated 2.8 million barrels in the week to Oct. 30 to 479.9 million, data from industry group the American Petroleum Institute showed on Tuesday. [API/S]
Government inventory data from the U.S. Department of Energy's Energy Information Administration will be released later on Wednesday. [EIA/S]