Oil settled slightly higher Wednesday after Fed chairman Ben Bernanke said the nation's economy will continue to recover, and gas prices will level off or drop.
Benchmark crude for June delivery rose 55 cents to settle at $112.76 per barrel on the New York Mercantile Exchange. In London, Brent crude rose 99 cents to settle at $125.13 a barrel on the ICE Futures exchange.
Bernanke's news conference was the first ever for a Fed chairman. While he said he expected inflation to tick up in the near term, mainly because of higher oil and gas prices, he believes that the nation's economy is in a "moderate recovery" that should be sustainable.
Bernanke also said there isn't much the Fed can do to bring down high gas prices that are "creating a financial hardship for a lot of people." He said the price of oil has been driven up by demand from booming emerging markets and by concerns about supplies amid unrest in the Middle East and North Africa.
Still, Bernanke said gas prices should eventually stabilize or come down. "Our view is gas prices will not continue to rise at the recent pace," he said.
The national average for a gallon of regular gas rose by a penny on Wednesday to $3.879, according to AAA, Wright Express and the Oil Price Information Service. That's 29.5 cents more than it was a month ago and over a dollar higher than a year ago.
Oil analyst Jim Ritterbusch expects pump prices to rise as much as another 20 cents a gallon in the next few weeks before coming down, as higher gas prices lead to less driving and weaker demand. Supplies should also increase as refineries ramp up capacity after seasonal maintenance. Ritterbusch predicted the price would be about $3.75 a gallon or less after Memorial Day.
In its weekly report on the nation's petroleum supplies, the Energy Department's Energy Information Administration said Wednesday that gasoline supplies fell 1.2 percent to 205.6 million barrels last week. Demand for gasoline over the past four weeks was 1.6 percent lower than a year earlier.
The EIA report said that crude oil inventories rose by 6.2 million barrels to 363.1 million barrels last week, which is 1.5 percent above year-ago levels. The increase was much bigger than the 1.6 million-barrel increase predicted by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos. Much of the increase was due to a surge in imported oil.
The Fed wrapped up a two-day meeting on Wednesday, saying that it will keep interest rates near zero. Low interest rates have helped weaken the dollar against other currencies. That has contributed to higher oil prices, since oil is priced in dollars. Oil is more attractive to buyers with foreign currency as the dollar falls.
In other Nymex trading for May contracts, heating oil rose 2.08 cents to settle at $3.2481 per gallon, gasoline gained 5.10 cents to settle at $3.3582 per gallon and natural gas lost a penny to settle at $4.377 per 1,000 cubic feet.