Oil futures ended higher Wednesday as traders looked past the Federal Reserve's downbeat assessment of the U.S. economy and focused on a bigger-than-expected decline in U.S. oil inventories.
Light, sweet crude for August delivery settled up $1.24, or 1.3%, at $95.41 a barrel on the New York Mercantile Exchange. Front-month prices got a 77-cent boost overnight with the expiration of the cheaper July contract.
Brent crude on the ICE futures exchange settled up $3.26, or 2.9%, to $114.21 a barrel.
Oil futures gradually rose throughout the day after the Department of Energy said oil stockpiles fell 1.7 million barrels last week. The decline was greater than the 800,000-barrel drop forecast by analysts in a Dow Jones Newswires survey. Declining oil stockpiles can signal higher demand from crude users such as refineries.
Futures initially pared their gains after the Federal Reserve noted in a statement that the U.S. recovery is continuing "somewhat more slowly" than previously expected, but they later recovered their momentum. Market watchers said the statement, which came at the conclusion of the central bank's Federal Open Market Committee meeting, was largely in line with previous readings on the U.S. economy.
"The markets were pretty much expecting what came out" of the meeting, said Tom Bentz, director at BNP Paribas Commodity Futures In New York.
In subsequent comments, Fed Chairman Ben Bernanke said the factors slowing the recovery are likely temporary.
Traders looked past the Fed assessment to focus on the decline in U.S. oil stocks, as well as other data from the DOE. Gasoline stockpiles posted a surprise 500,000-barrel decline last week, the DOE's Energy Information Administration said. Inventories of distillates, including heating oil and diesel, rose 1.2 million barrels, while refinery utilization rose 3.1 percentage points to the highest level since last August.
Analysts expected gasoline supplies to increase 800,000 barrels, while stocks of distillates were seen climbing 500,000 barrels. Refinery runs were expected to rise 0.3 percentage point.
Taken together, the data painted an encouraging picture of U.S. oil and fuel use. On Tuesday, MasterCard Advisory's LLC said U.S. gasoline demand rose 0.5% to 9.347 million barrels a day in its latest SpendingPulse report, the strongest level since the Memorial Day holiday.
Fuel product futures also advanced following the data. Front-month July reformulated gasoline blendstock, or RBOB, settled up 9.07 cents, or 3.2%, at $2.9733 a gallon. July heating oil settled up 6.49 cents, or 2.3%, at $2.9549 a gallon.
"I would say the DOE numbers were moderately constructive," said Peter Donovan, vice president at Vantage Trading in New York.
Concerns that the sputtering U.S. recovery has been hindering oil demand have kept traders on edge this month, pushing Nymex crude below $100 a barrel. The contract has fallen more than 7% so far in June.
In Europe, meanwhile, concerns about Greece's sovereign-debt crisis persisted despite a crucial vote of confidence won late Tuesday by the government of Prime Minister George Papandreou.
The debt-wracked country now faces a vote on additional austerity measures later this month as a condition for further rounds of aid from the European Union.