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Oil turns higher as Wall Street rally offsets inventory rise

Pump jacks and pipes are seen on an oil field near Bakersfield on a foggy day, California January 17, 2015. REUTERS/Lucy Nicholson

By Robert Gibbons

NEW YORK (Reuters) - Oil prices ended nearly 2 percent higher on Wednesday in volatile trade as rallying equities on Wall Street pulled crude up from lows after futures sank on concerns about global oversupply.

U.S. stocks rose more than 1 percent in afternoon trading as technology stocks led a rebound from Tuesday's steep losses and as China's move to again support its financial markets eased investor concerns.

"Looks like risk-on trade with a rising tide lifting all boats," John Kilduff, partner at Again Capital LLC in New York, said.

Oil continued its recent turbulent trajectory on Wednesday following Tuesday's 8 percent slide that ended a 25 percent three-session surge of frenzied short-covering after a drop to 6-1/2-year lows early last week.

Brent October crude rose 94 cents to settle at $50.50 a barrel, having recovered from a $47.74 low. It reached $51 post-settlement.

U.S. October crude rose 84 cents to settle at $46.25, after falling to $43.21 and reaching $46.77.

Also providing lift was a rally in Canadian synthetic crude prices. It traded at a premium to U.S. futures on expectations of a prolonged outage at the Syncrude oil sands project in northern Alberta, trading sources said.

Crude sank earlier in the session after Energy Information Administration (EIA) data showed U.S. crude stockpiles rose 4.7 million barrels to 455.4 million barrels last week after analysts in a Reuters poll had expected stocks to be unchanged.

"While there is some seasonality to crude beginning to build at this time of the year, a four-plus-million-barrel build is bearish and larger than normal," said Scott Shelton, commodities specialist with ICAP in Durham, North Carolina.

Crude initially extended losses on news that Shell (RSDa.L) lifted force majeure on Nigerian Bonny Light exports.

Also adding pressure was news that U.S. President Barack Obama has the backing of enough Senate votes to sustain a veto of any congressional resolution blocking Iran's agreement on its nuclear program with world powers.

Implementing the agreement will allow a sharp increase Iran's oil exports now curbed by sanctions.

Crude oil also received support from strong U.S. RBOB gasoline futures (RBc1) ahead of the U.S. Labor Day holiday and by news that a reformer unit at Philadelphia Energy Solutions' (PESC.N) Philadelphia refinery complex was shut on Tuesday due to small fire, although it was being restarted on Wednesday.

EIA data showed gasoline inventories fell 271,000 barrels, less than the 1.3 million-barrel slide expected by analysts.

(Additional reporting by Lisa Barrington in London and Keith Wallis in Singapore; Editing by Marguerita Choy)