Oil rose above $111 a barrel on Wednesday after three days of losses, supported by hopes the Federal Reserve might hint at monetary easing to boost the U.S. economy and by some signs of tighter physical supply.
The U.S. Federal Open Market Committee, which concludes its two-day policy meeting on Wednesday, may offer hints of further monetary easing to revive the U.S. economy, which would pressure the dollar.
Brent crude briefly pared gains after the Energy Information Administration data showed U.S. crude inventories rose by a more-than-expected 1.83 million barrels and that gasoline stocks posted a surprise increase.
"As always it's a mixed bag, but at first glance it seems bearish, with crude and gasoline up a bit more than expected," said Andy Sommer, an analyst at EGL, of the EIA report released a 1430 GMT.
"However, I don't think it will play a major role as the focus will soon return to problems in the euro zone and macroeconomic indicators."
Brent was up $1.66 at $111.20 a barrel by 1529 GMT after earlier rising as high as $111.47. U.S. crude gained $1.00 to $93.19.
The prospect of further Fed easing provides support for demand-sensitive assets such as oil, which benefits from a weakening of the dollar as it becomes more affordable to holders of other currencies.
The dollar was down 0.6 percent against a basket of currencies.
Relatively weak supply -- with problems in the North Sea and Libyan oil yet to make a significant return to the market -- has also been supportive of the oil price.
"Basic fundamentals seem to be that if you're looking for supply, it's fairly tight; that's what people are telling us for crude and products. Weakness was driven by financial markets," said Tony Machacek, a broker at Jefferies Bache.
Investors were wary about the sustainability of price gains, however, with weak data and festering euro zone debt problems seen as weighing on markets.
The EIA supply report contrasted with that of industry group the American Petroleum Institute, which said in a report on Tuesday that U.S. crude inventories had fallen 156,000 barrels last week.
Investors were also watching for any fallout from Monday's bankruptcy filing by brokerage MF Global Holdings Ltd MF.N following the discovery that the company failed to protect customer accounts by keeping them separate from its own funds.
(Additional reporting by Florence Tan in Singapore and Jane Lee in Kuala Lumpur, editing by Jane Baird)
