Oil prices rebounded in Asia Thursday, thanks to a weak dollar and bargain-hunting a day after the commodity sank to fresh two-month lows.

Both main contracts tumbled more than four percent Wednesday after official US data showed a smaller than expected decline in crude stockpiles, adding to fears that a supply glut might not be easing as quickly as expected.

Commercial inventories fell 2.5 million barrels in the week ended July 8 but still remained at historically high levels while production, which had been steadily falling, increased.

Adding to the disappointment about the disappointing reading was the fact it came during the July 4 Independence Day holiday and at the height of the summer driving season.

However, the sharp drop provided dealers with an incentive to buy a low prices, while a rally in the dollar over the past week was pared, making it even cheaper for anyone holding other currencies.

At about 0400 GMT, US benchmark West Texas Intermediate was up 61 cents, or 1.36 percent, at US$45.36 while Brent crude rose 57 cents, or 1.23 percent, to US$46.83.

"Every time we have seen these big pullbacks, there is quite a lot of strong buying around that $44, $45 level," Angus Nicholson, a markets analyst in Melbourne at IG Ltd., told Bloomberg News.

"There are definitely active participants in the market who are very happy to be picking up oil at that price."

Prices have fluctuated between US$44 and US$52 a barrel over the past month after hitting near 13-year lows below US$30 in February.