NEW YORK (Reuters) - Oil closed up on Wednesday for the first time in five days as traders took stock of the market's rout after crude prices lost nearly 10 percent over two days and benchmark Brent fell to below $50 a barrel.
Weekly data for U.S. crude inventories showed a surprising drop last week, helping oil reverse early losses, although gasoline and distillates stocks jumped by record levels.
Oil prices were lower in early New York trade, extending their downdraft after the first negative reading in five years for euro zone inflation. They rebounded after the inventory data issued by the U.S. Energy Information Administration (EIA).
Brent's front-month contract LCOc1 settled at $51.15 a barrel, up 5 cents from Tuesday's close. It hit a session low of $49.66 in European trade, after euro zone consumer prices in December fell by more than expected.
U.S. crude CLc1 settled up 72 cents at $48.65, after rallying earlier to $49.31.
Brent's premium to U.S. crude CL-LCO1=R narrowed to $2.50, its lowest since mid-October.
Some traders said oil markets could be at a crossroads after losing over half their value from June highs, especially after the astounding 10 percent drop in the past two days.
Others thought Wednesday's price action was just a reprieve ahead of another leg lower.
"I would call this a dead cat bounce," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York. "Nothing's fundamentally changed. These people that have gone trying to pick a bottom have been wrong for weeks on end."
U.S. gasoline and distillate fuel stocks soared by the most ever last week, rising more than 19 million barrels as a global crude oil surplus begins to translate into swelling fuel inventories, the government data showed.
"The drawdown in crude oil inventories is really inconsequential given the large amount of overall inventories," said John Kilduff, partner at Again Capital LLC in New York.
Some analysts said better-than-expected U.S. jobs data on Wednesday could have aided sentiment in oil. Private employers in the United States added 241,000 jobs in December, beating the median forecasts of analysts, a report by a payrolls processor showed.
Additional reporting by Henning Gloystein in Singapore and Yoshifumi Takemoto in Tokyo; Editing by Michael Urquhart, Chris Reese and Marguerita Choy