Oil rose above $98 a barrel Wednesday in Asia after a report showed U.S. crude supplies fell more than expected, a sign demand may be improving.
Benchmark crude for February delivery was up 85 cents to $98.09 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The January contract, which expired Tuesday, rose $3.34, or 3.6 percent, to finish at $97.22.
In London, Brent crude was up 80 cents at $107.53 on the ICE futures exchange.
The American Petroleum Institute said late Tuesday that crude inventories rose 4.6 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.3 million barrels.
Inventories of gasoline slid 2.8 million barrels last week while distillates dropped 400,000 barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.
Evidence the U.S. economy is improving also helped extend Tuesday's gains in the oil price. U.S. retailers said that holiday sales jumped last week, while the government reported a surge in apartment construction and building permits in November.
Some analysts remain pessimistic about the global economy and expect a slowdown to undermine demand for commodities.
"We expect the problems in the eurozone to escalate and global growth to remain sluggish, maintaining the downward pressure on the prices of commodities," Capital Economics said in a report.
In other energy trading on the Nymex, natural gas rose 0.3 cent to $3.13 per 1,000 cubic feet. Heating oil added 2.9 cents to $2.89 a gallon and gasoline futures were up 1.1 cents to $2.60 a gallon.