By Barani Krishnan
NEW YORK (Reuters) - Oil prices surged 4 percent on Tuesday, buoyed by investors covering short positions and an equities rally that lifted riskier assets globally, helping crude stage a technical rebound from two-month lows hit the previous session.
Crude futures also got a lift from expectations that data would show an eighth straight week of declines in U.S. crude stockpiles.
"The market's gotten really short over the past two weeks with everyone focused on weaker fundamentals and now you're seeing sudden covering," said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.
Brent crude futures were up $2.03, or 4.4 percent, at $48.28 per barrel by 12:22 p.m. EDT (1622 GMT).
U.S. crude's West Texas Intermediate futures rose $1.86, or 4.2 percent, to $46.62.Oil prices hit two-month lows on Monday, with Brent sliding under $46 while WTI fell to nearly $44.
"This certainly appears to be a technical correction. My call was for WTI to test $44.35 and we had almost gotten there," said Troy Vincent, analyst at New York-based energy data provider Clipperdata. "Also, I think the market is hesitant to move nearer to $40 support so quickly in the middle of summer."
The pace of Tuesday's rally stunned some market participants. In early New York trade, Brent and WTI were up only about 2 percent.
"The sharper move up caught everyone by surprise," said a crude futures broker.
The rally came ahead of a report on U.S. crude stockpiles due from trade group American Petroleum Institute (API) at 4:30 p.m. EDT (2030 GMT). A Reuters poll forecast U.S. crude stockpiles fell 3.3 million barrels last week, declining for an eighth week in a row.
The U.S. government's Energy Information Administration (EIA) will issue official inventory data on Wednesday.
Oil was also supported by producer group OPEC's optimism that the market was likely to achieve balance in supply-demand by next year. The EIA, in a separate report on Tuesday, raised its forecast for U.S. oil demand growth in 2017.
Saudi Arabia's Energy Minister said a crude price above $50 a barrel was required to ensure continued investment in the space despite a global crude glut.
A rally in global equity markets added to the upbeat sentiment in oil. The dollar fell too, making greenback-denominated oil more attractive to holders of the euro and other currencies.
Oil prices tumbled last week after the EIA reported disappointing drawdowns in U.S. crude and gasoline inventories that pointed at weak demand.
A rising U.S. oil drilling rig count and cuts in bullish hedge fund bets on crude to four-month lows have also pressured prices.
(Additional reporting by Dmitry Zhdannikov, Ahmad Ghaddar and Christopher Johnson in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy and David Gregorio)
