US benchmark West Texas Intermediate for delivery in May rallied to a two-month peak at USD 54.25 per barrel, before pulling back to USD 53.89, up 60 cents from Tuesday's close.

Brent North Sea crude for May hit a three-week high at USD 59.63 a barrel. It later stood at USD 59.16 in midday deals, up 73 cents.

"Oil prices are continuing their upswing," said Commerzbank analyst Carsten Fritsch. "Brent is nearing the USD 60 per barrel mark, while WTI is already trading at a 2.5-month high of a good USD 54 per barrel.

Speculative financial investors are clearly taking the latest news of a declining US oil supply as reason enough to further step up their investments in the oil market.

But he cautioned "Despite all the euphoria, the production falls reported so far are not nearly sufficient to stop US crude oil stocks from rising, as inventory data due to be published ... this afternoon are likely to show.

The US Energy Information Administration said on Monday that output from the country's seven shale regions, which has driven production to a record high, looked set to fall by
57,000 barrels per day in May.

Analysts said a decline should help ease the global crude oversupply, which led to a collapse in prices of more than 50 percent between June and January.

Latest News  from Business News Desk