U.S. crude futures settled higher Wednesday after the Federal Reserve's policy-setting committee decided to expand its bond-buying program in an effort to support a still-weak economic recovery.
Light, sweet crude for January delivery rose 98 cents, or 1.1%, to settle at $86.77 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures exchange traded $1.64 higher at $109.65 a barrel.
The price gains followed the central bank's decision to buy $45 billion in Treasurys each month in addition to the $40 billion in mortgage-backed securities it purchases each month.
Oil prices rose along with gold and other commodities markets as investors flocked to hard assets that will retain their value in the face of potential inflation.
Tom Pawlicki, an energy analyst at EOXLive in Chicago, said the falling U.S. dollar also prompted bets on higher oil prices. The dollar declined against a basket of currencies following the Fed statement. Crude-oil futures typically rise when the dollar falls.
"This rekindles the spirit of the weak dollar-positive commodities trade," said Mr. Pawlicki. "Investors are gravitating towards stores of value."
Comex gold futures recently settled 0.5% higher, at 1,717.90 a troy ounce. The Dow Jones Industrial Average was recently 47 points higher at 13,296.
Crude futures have slumped in recent months as rising supplies have begun to outstrip lackluster demand, leading to higher stockpiles of oil.
Oil's gains following the Fed announcement were held back by an earlier report from the U.S. Energy Information Administration that showed crude-oil stockpiles rose by 800,000 barrels last week, surprising analysts who had expected a decline. Total stockpiles rose to 373 million barrels, 50 million barrels, or 16%, above the five-year average level for this time of year.
Gasoline futures were also kept in check after stockpiles rose by five million barrels to 217 million barrels, the highest level since April. Analysts had expected a 1.8-million-barrel increase.
Front-month January reformulated gasoline blendstock, or RBOB, settled 3.60 cents, or 1.4%, higher at $2.6465 a gallon, after rising as high as $2.6668 a gallon earlier Wednesday.
Heating-oil futures settled 1.4% higher at $2.9668 a gallon, down from above $3 a gallon earlier as stocks of distillate also rose by more than analysts had forecast.
The inventory increases offered new evidence that the U.S. market is well-supplied with oil and fuel products despite stretched fuel supplies in other regions.
Surging domestic production combined with slumping fuel usage have put a lid on prices, holding U.S. oil futures below $90 a barrel for several weeks.
Copyright (c) 2012 Dow Jones & Company, Inc.
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