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NEW YORK (Reuters) - Crude oil futures rose in choppy trading on Wednesday, getting a lift from U.S. equities despite pressure from a larger-than-expected increase in U.S. crude inventories and a report that Iran may consider a halt to its nuclear program.
Prices moved little after the U.S. Federal Reserve, as expected, said at the end of a two-day policy meeting that it will keep interest rates exceptionally low at least through late 2014.
"Oil got support from equities, which are on a rally mode and as support developed after the day's lows around $103 was not violated," said Hamza Khan, analyst at the Schork Group in Villanova, Pennsylvania.
The central bank said the U.S. economy had been expanding moderately and that the labor market had improved in recent months. It noted, however, that while the jobless rate had declined, it remained elevated.
Later, Fed Chairman Ben Bernanke said at a press conference that the central bank remains prepared to do more to ensure that the economic recovery continues.
"The recent rise in gasoline prices has created a temporary bulge in headline inflation and overall inflation, but we expect to pass through the system and assuming no new shocks in the oil sector - inflation ought to moderate about 2 percent this year," Bernanke said.
U.S. crude inventories rose almost 4 million barrels in the week to April 20, up for the fifth week in a row, the U.S. Energy Information Administration said. A forecast in a Reuters poll had called for a 2.7-million-barrel build. <EIA/S>
The EIA also reported larger-than-expected drawdowns of 2.24 million barrels in U.S. gasoline stockpiles, their 10th straight week of decline, and 3.05 million barrels in distillates, which include heating oil and diesel, their fourth drop in five weeks.
"The report is neutral to bullish," said John Kilduff, partner at Again Capital LLC in New York.
"The commitment by the U.S. refining industry to keep a lid on refined product inventory levels remains unbowed," he said.
In London, ICE Brent crude for June delivery settled at $119.12 a barrel, gaining 96 cents, the highest close since April 13. Brent rebounded after two straight days of losses.
Brent was also supported by news of delays in North Sea Forties loading in May due to production problems at the UK's largest oilfield, trade sources said, disrupting supply of the oil that helps set global prices.
U.S. June crude settled up 57 cents at $104.12 a barrel, highest since April 17.
"U.S. June crude's $103.49 was a pivot and the test of $104.49/$104.51 was key," said Tony Rosado, options broker at New York-based GA Global Markets.
Brent's premium against U.S. crude widened to $15 at the close, from $14.61 on Tuesday.
Brent's volume outpaced U.S. crude, hitting 15 percent above its 30-day average, according to Reuters data. U.S. crude volume was down 9 percent from its 30-day average.
Initially, the latest EIA data had little impact on product futures. But front-month heating oil futures posted a premium against gasoline futures for the first time since February 29, according to Reuters data.
At the close of trading on the New York Mercantile Exchange, May heating oil settled at $3.1611 a gallon, posting a gain of 3.16 cents, while May RBOB gasoline ended at $3.1557 a gallon, down 0.36 cent. May heating oil gained a premium of 0.54 cent against the front-month RBOB contracts.
"The gasoline bubble has burst as there are more imports coming in from Europe," said Phil Flynn, analyst at PFGBest Research in Chicago.
In early trade, prices fell after a report from Bloomberg said Iran was considering a Russian proposal to halt its nuclear work to avert new European Union sanctions. The report was sourced to Tehran's envoy in Moscow.
The West alleges that Iran is developing atomic weapons, but Iran insists its nuclear program is for civilian use. The tensions spawned by Tehran's nuclear program had lifted prices in March to their highest this year, as wranglings with the West created fears of supply disruption from the No. 2 producer in the Organization of the Petroleum Exporting Countries (OPEC)
Both the European Union and the United States have imposed sanctions going into effect this summer, but Iran had agreed to resume long-stalled talks about its disputed program with six world powers.
Some comments from Israel on Iran have also become more conciliatory. Israel's military chief said in an interview published on Wednesday he does not believe Iran will decide to produce an atomic bomb.
Additional reporting by Robert Gibbons and Jeffrey Kerr in New York and Julia Payne in London; Editing by David Gregorio