Oil prices topped $82 a barrel Wednesday after crude inventories grew less than expected last week, and the stock market rose on the Fed's promise to keep interest rates at record lows.
Benchmark crude for April delivery was up 76 cents to $82.46 a barrel on the New York Mercantile Exchange.
The Energy Information Administration said crude inventories rose last week by a million barrels to 344 million barrels. Analysts expected a build of 1.9 million barrels.
The Dow Jones Industrial Average was up about 44 points at midday. Investors were reassured by The Fed and Japan's central bank, after both reaffirmed plans to keep interest rates low to spur the global economic recovery. Oil and gas demand is expected to increase as economies recover and businesses hire more workers.
Meanwhile, a delegate at the Vienna meeting of the 12-nation Organization of Petroleum Exporting Countries said the group agreed to keep production targets unchanged while OPEC members were asked to curb overproduction, estimated at nearly 2 million barrels a day.
Despite sluggish oil demand in the U.S. and other developed countries, oil analyst Andrew Lipow said global economic indicators support higher prices.
"The big news is that the economies around the world have stabilized from their abyss a year ago," Lipow said. He added that the energy demand outlook show's signs of hope given that the EIA, the International Energy Agency and OPEC have all bumped up their forecasts for the year.
Not everyone thinks happy days are here again for the economy or that higher oil and gas prices can last.
"The Kool-Aid that has been offered, and apparently drunk by oil market participants is that the recession is over and the long slog back to prosperity has begun," said MF Global analyst Mike Fitzpatrick in a research note.
Fitzpatrick said the Fed's comments about "high unemployment, modest income growth, lower housing wealth and tight credit" underline the demand challenges ahead.
Retail gasoline prices rose Wednesday. The nationwide average added 2 cents at $2.789 per gallon according to AAA, Wright Express and Oil Price Information Service.
Pump prices have risen 17.3 cents in the last month and are now 87.9 cents higher than levels of a year ago.
In other Nymex trading in April contracts, heating oil rose 1.97 cents to $2.1340 a gallon, and gasoline gained 2.36 cents at $2.2986 a gallon. Natural gas fell 4.6 cents to $4.329 per 1,000 cubic feet. Eralier it hit a new 52-week low of $4.280.
In London, Brent crude was unchanged at $79.19 on the ICE futures exchange.
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