Investing.com - The data showed a disappointing U.S. inventory draw, but oil bears, sated with yesterday's plunge, are keeping their powder dry for the other main event of the day: the Fed.
U.S. West Texas Intermediate crude rose $1.26, or 2.7%, to $47.86 per barrel by 11:54 AM ET (16:54 GMT). It had plumbed an August 2017 low of $46.12 in Tuesday's session.
U.K. Brent, the global oil benchmark, climbed $1.27, or 2.3%, to $57.53 per barrel. It sunk to an Oct 2017 low of $56.87 the previous day.
U.S. crude stockpiles fell by 497,000 barrels for the week ended Dec. 14 vs a forecast drop of 2.44 million, the Energy Information Administration said.
Gasoline inventories rose by 1.77 million barrels, compared to expectations for a build of 1.2 million barrels, the EIA added. The only positive number in its weekly data release was for distillates, which the agency said saw a decrease of 4.24 million barrels versus an expected gain of 0.57 million.
Despite the somewhat bearish data, oil prices retained their early gains following the previous day's tumble of 7%.
While some of the rebound was probably due to those buying back to cover their short positions that contributed to Tuesday's plunge, players also appeared to be pacing themselves ahead of the Federal Reserve's rate hike decision at 2:00 PM ET (19:00 GMT).
The Fed is expected to raise interest rates for a fourth time this year at the end of its December meeting today, with the market betting on a quarter-point hike.
The dollar, a contrarian bet to oil and other commodities, hit six-week lows in Wednesday's morning trade in anticipation of the announcement. If the Fed does as expected, oil prices could fall again in late trading leading into the New York settlement at 2:30 PM ET.
But if the central bank stalls for any reason on a hike or issues an excessively dovish outlook for 2019, consistent with speeches by its officials of late, then oil may tack on further gains.
"If we see on the Fed's announcement and commentary, a large move in the equity or bond markets, then we could see crude move in tandem with that, whether higher or lower," said Tariq Zahir, managing partner at Tyche Capital Advisors, an oil-focused fund in New York.
"We do feel that if there's a risk-off posture in the markets overall, then crude could continue to seek new lows despite yesterday's massive selloff."
With slightly more than a week before trading for 2018 ends, WTI is down 38% from the four-year highs of nearly $77 struck in October. Brent is 34% lower than the 2014 high of almost $87 struck two months back.
Some think WTI may break below the $40 support in coming days, citing the thinner trading volumes typical for the holiday season and the heavier reliance at this time of the year on algorithmic trading models that tend to focus on price action, ignoring all other fundamentals.
"Currently the momentum is one way … lower," Dominick Chirichella, of the Energy Management Institute in New York, said.