The American Petroleum Institute yesterday reported that crude inventories dropped by 5.14 million barrels last week, Bloomberg News reported. Data from the Energy Information Administration due later today are likely to confirm the fall in supplies.
Oil prices were also supported by an overnight surge in US equities and strong US home sales that could point to the US Federal Reserve raising interest rates as early as June.
Prices have rebounded since plunging to near 13-year lows below USD 30 in February but are still well short of peaks of more than USD 100 a barrel reached in June 2014.
Brent futures dipped 4 cents to USD 48.31 after closing down 37 cents in the previous session, with both contracts finishing with modest losses for a fourth straight session
The Organisation of the Petroleum Exporting Countries (OPEC), of which Iran is a member, is due to meet in Vienna on June 2 after talks in Doha involving OPEC members and other major producers such as Russia in April failed to reach a deal to cap production.
In a further sign of abundant supply the number of rigs operated by US drillers was steady last week for the first time this year.
Prices hit fresh 2016 highs on Wednesday due in part to production outages resulting from persistent wildfires around the Canadian oil sands hub of Fort McMurray but pulled back to settle lower after the dollar climbed.
International Brent crude futures were trading at USD 48.28 per barrel at 0101 GMT, down 65 cents or 1.3 percent from their last settlement.
Prices have shot up after US banking giant Goldman Sachs this week said that supply disruptions in Africa's biggest oil producer Nigeria -- along with better demand -- had created a surprising short-term supply deficit.
International Brent crude futures were trading at USD 49.31 per barrel at 0047 GMT, 3 cents above their last settlement, while US West Texas Intermediate crude futures were unchanged at USD 48.31 a barrel.
The production cuts are seen helping to rebalance a market awash with excess crude oil, pushing up prices for NYMEX June futures delivery up as much as 11 percent in the last four days. It settled on Monday at USD 47.72 a barrel.
Crude futures have rallied for most of the past two weeks from a combination of Nigerian, Venezuelan and other outages, declining US production and virtually frozen inflows of Canadian crude after wildfires in Alberta's oil sands region.
International Brent crude futures were trading at USD 48.50 per barrel at 0255 GMT, up 67 cents, or 1.4 percent, from their last settlement.
US oilfield services firm Baker Hughes said the number of US drilling rigs fell to its lowest level since October 2009, which is good news for prices as US production is a key contributor to the oversupply.
The uptrend is likely to continue as the IEA report shows that a rebalancing of the supply and demand situation could come in sooner rather than later, analysts said.
The dollar has recovered 2.46 percent in value from May lows against a basket of other leading currencies , reversing an almost 8-percent fall earlier in the year.
Later around 1630 GMT and after traders booked profits, New York's West Texas Intermediate for delivery in June stood at USD 45.98 a barrel, down 25 cents compared with Wednesday's close.
The Department of Energy said Wednesday that inventories slid 3.4 million barrels last week, confounding analysts' expectations for a rise and signalling strong demand in the world's top oil-consuming nation.
At around 1600 GMT, US benchmark West Texas Intermediate for delivery in June was up USD 1.24 at USD 45.90 a barrel.
The commodity has seen strong swings this week as traders weigh up the effects of the blazes that have torn across the vast oil sands region of Alberta as well as disruptions elsewhere.
Canadian authorities were focusing on restoring output after the fires that have raged for a week forced oil companies in the area to shut down operations, slashing production by one million barrels a day.
US crude futures were trading at USD 43.09 per barrel at 0040 GMT, down 35 cents from their last settlement.
Saudi Arabia, the biggest exporter in the OPEC producers' group, on Friday replaced Ali al-Naimi -- who had been in his post for two decades -- with a close ally of the deputy crown prince.
Canadian officials on Sunday showed some optimism that they were beginning to get on top of the wildfire, as favorable weather helped fire fighters and winds took the flames southeast, away from oil sands boomtown Fort McMurray.
The non-farm payroll report due for release later in the day could determine when the Fed lifts borrowing costs, which would affect the dollar and, in turn, demand for oil.