Oil prices rise on surprise US inventory decline

Oil prices gained Wednesday after an unexpected decline in US oil inventories.

Prices were also strengthened by the Federal Reserve's widely expected move to maintain its stimulus program.

A barrel of West Texas Intermediate for delivery in April sold for $92.96, up 80 cents on the New York Mercantile Exchange.

European benchmark Brent oil for May delivery closed at $108.72 a barrel, up $1.27.

The rally came as the US Department of Energy reported that oil inventories fell by 1.3 million barrels in the week ending March 15. Analysts had forecast a build of 1.7 million barrels.

The inventory numbers are "a little bit bullish," said Andy Lebow, senior vice president for energy futures at Jefferies Bache.

At the same time, the inventory report showed that the demand numbers were "weak," Lebow said. The report said total US petroleum demand came in at 17.77 million barrels a day, down 4.5 percent from last week's level.

Analysts said the low value of the dollar was also supportive of higher oil prices. Because oil is traded in dollars, the commodity becomes cheaper for consumers using stronger currencies when the dollar declines.

The Federal Reserve's decision to keep its monetary easing policies in place gave further support to the euro compared with the dollar.

"It's steady as she goes," Stephen Schork, analyst at the Schork Report, said of the Fed policy.

Like other markets, the oil market kept one eye on the debt crisis in Cyprus, with the Cypriot government scrambling to find alternative ways of raising funds to get the EU-IMF bailout loans.

David Bouckhout of TD Securities said while Cyprus is itself a small economy, markets are concerned about what its plight means for the eurozone.

"If it were to leave the eurozone, that would set a precedent," Bouckhout said.