Oil eased to around $71 a barrel on Wednesday after a bigger-than-forecast rise in U.S. fuel stocks offset positive expectations for the world economy that spurred other markets higher.

NYMEX crude was 27 cents higher at $71.23 a barrel by 1319 GMT, after settling up $2.07 on Tuesday, while ICE Brent was up 12 cents at $69.98.

Equities markets and other commodities rose strongly, inspired by comment from the U.S. Federal Reserve Chairman Ben Bernanke recovery was gaining momentum.

The FTSEurofirst 300 <.FTEU3> index of top European shares cracked the 1,000 mark for the first time since October 2008. <.EU> and gold hit 18-month highs.

But oil focused on inventory levels in the world's biggest energy user after figures from U.S. industry body the American Petroleum Institute showed crude stocks had risen, countering expectations for a fall, and product inventories had risen much more than forecast.

The market was waiting to see if government data for release at 1430 GMT would confirm the trends and imply still weak fuel demand.

We always have a pause on Wednesday for oil, said BNP Paribas analyst Harry Tchilinguirian. It's a normal pitstop for the week for the market to take stock of what's happening in the U.S.

Christopher Bellew, broker at Bache Financial, said oil trade was rangebound and the market was in thrall to the Energy Information Agency statistics before attempting any likely breakthrough.

We are much stronger than yesterday when we were at the bottom of the range. We just recovered last night, rather than this morning, Bellew said.


Although supply and demand fundamentals played big roles on Wednesday, many say a return of risk appetite is the real reason for recovery from a market low of $32.40 in December -- the weakest in nearly five years -- to the August year-high of $75.

As all markets have looked to economic data suggesting the worst of economic recession is over, oil has spent much of the year moving in tandem with gains on equity markets and with other commodities.

It has also been inversely correlated to the dollar, which on Wednesday hit a one-year low against a basket of currencies, as investors, no longer as nervous over potential losses, turned to riskier assets.

A weaker dollar can also fuel purchases of oil and other dollar-denominated commodities, as they become relatively less expensive to non-dollar holding investors.

A normally-tight-lipped OPEC delegate wrote in a Kuwaiti newspaper on Wednesday that the Organization of the Petroleum Exporting Countries may need to cut its oil supply next year to match a fall in the group's crude demand.

OPEC, supplier of more than a third of the world's oil, estimated in a Tuesday report that crude demand would fall by 460,000 barrels per day in 2010 from 2009.

...which means OPEC will reduce supplies another time next year to achieve balance, Mohammed al-Shatti wrote in a column for Kuwait's al-Rai newspaper.

(Additional reporting by Barbara Lewis and David Sheppard in London; Editing by Keiron Henderson)