Oil prices edged up for a second day on Wednesday, recovering from a drop below $50 a barrel, after weekly data showed a fall in U.S. crude inventories, while a stronger dollar tempered gains.

The dollar rose to its highest in over three months after a voting member of the U.S. Federal Reserve's policy-setting committee expressed support for an interest rate hike in September.

A stronger dollar tends to undermine crude oil by making it more profitable for non-U.S. investors to sell it.

Growing oversupply, slowing demand from China and the prospect of crude flooding onto the market from Iran after Tehran's deal with the West over its nuclear program have knocked 21 percent off the oil price this quarter.

"All the negative news we’ve had in the last few weeks and months, starting with the nuclear deal with Iran, through to economic weakness in China and the strength of the dollar have all added up and, at least in our view, this (sell-off) was overdone," said Commerzbank strategist Eugen Weinberg.

"When prices are oversold, a rebound becomes more likely."

September Brent crude futures rose 46 cents to $50.45 a barrel by 1045 GMT (0645 EDT) after gaining 1 percent on Tuesday, up from a six-month low on Monday.

U.S. crude for September delivery gained 32 cents to trade at $46.06, up from Monday's four-month low.

Adding a layer of support to the price was evidence of further declines in U.S. crude inventory levels.

U.S. crude inventories fell by 2.4 million barrels last week to 459.7 million, the American Petroleum Institute (API) said late on Tuesday, compared with analysts' expectations for a decrease of 1.5 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 504,000 barrels, API said. [API/S]

Still, inventories are up from 387.3 million at the end of 2014 and in July OPEC pumped at record rates while the U.S. rig count rose for the first time this year. [OPEC/O] [RIG/U]

The U.S. Energy Information Administration (EIA) publishes its figures on Wednesday at 10.30 a.m. EDT (1430 GMT).

"In Brent we trace a first support at the low yesterday ($49.36 $/bbl) followed by 49.00 $/bbl and 48.00 $/bbl. The low of January is at 45.19 $/bbl. First resistance at 50.00 $/bbl followed by 51.00 $/bbl and 51.70 $/bbl," Petromatrix analysts wrote in a note.

Source: www.reuters.com

Please leave comments and feedback below