"We're gearing up on expectations that the wildfires in Canada may finally be showing up in U.S. crude inventory numbers," said Phil Flynn, analyst at the Price Futures Group in Chicago. "If they show up decisively, it may be what the market needs to test $50."

Commercial crude stocks in the United States likely fell by around 2.5 million barrels to 538.8 million in the week ended May 20, a Reuters poll showed.

Oil also got a lift as U.S. stocks rose to their highest in the last seven sessions, helped by gains in technology and financial stocks. [.N] Crude buyers seemed unfazed by a stronger dollar <.DXY>, which typically makes greenback-denominated oil costlier in other currencies. [.N] [USD/]

The American Petroleum Institute (API), a trade group, will issue its own data on U.S. crude stockpiles at 4:30 p.m. EDT (2030 GMT), ahead of official numbers from the U.S. government on Wednesday.

U.S. crude's West Texas Intermediate (WTI) futures were up 40 cents, or 0.8 percent, at $48.48 by 11:48 a.m. EDT. Brent crude futures rose 25 cents, or 0.5 percent, to $48.95. Both had settled down in four earlier sessions.

Oil was also supported by an Iraqi official's remarks that maintenance issues and power outages have caused the OPEC member's output to fall to 4.5 million barrels per day from January's record high of 4.78 million bpd.

Consultant IHS added to the bullish theme, saying just 2.8 billion barrels of oil were discovered outside North America in 2015, the lowest since 1952, following a sharp fall in exploration and appraisal drilling.

"As spare capacity dwindles, the threat of a price spike increases," said Matt Smith, who tracks crude cargoes for New York-based Clipperdata. "Non-OPEC production should continue to fall through the duration of the year, gradually erasing the supply overhang and further tightening up crude fundamentals."

Offsetting some of the positive sentiment in oil was a strike in France that dented European crude demand as refinery operations were disrupted by picketers. French police used water cannon and tear gas to break up a strike that blocked access to a large oil refinery in the southern port area of Marseille.

(Additional reporting by Simon Falush in LONDON; Editing by David Evans and David Gregorio)

By Barani Krishnan