* U.S. crude stocks unexpectedly fall 4 million barrels
* Gold hits record high on weak dollar
* Fed plans to hold rates near zero for "extended period"
(Updates with closing prices)
NEW YORK, Nov 4 (Reuters) - Oil prices rose by 1 percent on
Wednesday after government data showed an unexpected decline in
U.S. crude inventories, and the U.S. Federal Reserve said it
planned to keep interest rates low.
U.S. crude for December delivery <CLc1> rose 80 cents to
settle at $80.40 a barrel, in a third consecutive day of gains.
In London, Brent crude <LCOc1> settled up 78 cents at $78.89 a
barrel.
Data from the U.S. Energy Information Administration showed
crude inventories decline by 4 million barrels in the world's
biggest consumer in the week to Oct. 30, countering analyst
expectations for an increase. []
The decline helped lift oil markets, which have been eager
to see signs of a turnaround in the economy and flagging fuel
demand.
The Federal Reserve's Open Market Committee expressed
confidence that a U.S. economic recovery was building -- which
could spur more demand for crude -- but it stuck to an earlier
commitment to keep interest rates near zero for "an extended
period" to help usher the economy out of recession.
Analysts had warned earlier that oil prices could fall if
the Fed signaled any intention to boost the cost of borrowing.
Analysts said the EIA inventories report showed U.S. fuel
demand was still slow to recover, as oil product stocks posted
only modest drawdowns last week, in spite of a 1.2 percentage
point drop in refinery utilization rates. []
"The crude drop has boosted the market, but the report
can't be seen as too bullish. The fact is refinery rates
dropped more than a percent and we still didn't see a major
drop in product inventories," said Gene McGillian, an analyst
at Tradition Energy in Stamford, Connecticut.
"Refiners don't see the need to push through more crude,
because demand hasn't been recovering at the pace that some
expected."
Gasoline stockpiles fell by 300,000 barrels last week,
against expectations for a slight build, while distillate
inventories dropped a less-than-expected 400,000 barrels,
according to the EIA.
Gold hit a record high above $1,095 per ounce as the dollar
weakened and after the International Monetary Fund's 200-tonne
sale of gold to India's central bank enhanced sentiment towards
the metal. []
Investors have put cash into commodities this year as a
hedge against inflation, helping to lift oil prices from below
$33 a barrel in December 2008.
Oil drew support on Wednesday from a weakening dollar,
which fell against a basket of currencies. <.DXY>. A weaker
dollar makes commodities like oil cheaper for those holding
other currencies.
The Fed's closely watched policy statement signaled it
would not scale back economic stimulus measures. The Fed
expects to keep overnight interest rates, which it cut close to
zero in December, exceptionally low for a long time, citing
"low rates of resource utilization, subdued inflation trends,
and stable inflation expectations." []
(Reporting by Joshua Schneyer, Matthew Robinson, Robert
Gibbons and Gene Ramos in New York; Joe Brock and Alex Lawler
in London; Editing by Walter Bagley)
