Benchmark West Texas Intermediate crude oil for February delivery rose $1.58, or 1.7 per cent, to US$94.17 a barrel on the New York Mercantile Exchange.
Brent crude, used to set prices for international varieties of crude, rose 67 cents at US$106.27 a barrel in London.
The U.S. Energy Department reported that oil supplies fell by a larger than expected 7.7 million barrels last week. Analysts surveyed by Platts, the energy information arm of McGraw-Hill, expected a decline of 1.6 million barrels.
The drop marked the seventh consecutive decline in U.S. crude oil supplies.
Oil has risen 2.6 per cent in the past two days. It started the year with steep declines because supplies of crude oil and fuel appeared ample enough to offset rising demand.
In other energy futures trading in New York: wholesale gasoline was flat at US$2.63 a U.S. gallon (3.79 litres), heating oil gained four cents to US$2.98 a gallon and natural gas fell four cents to US$4.33 per 1,000 cubic feet.
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