Oil rose above $68 per barrel on Wednesday, buoyed by a drop in U.S. gasoline inventories and a weak dollar.

U.S. government weekly oil data on Wednesday showed a 1.6 million barrel drop in gasoline inventories, which was line with separate figures from industry group American Petroleum Institute but against analysts' forecast for an increase.

Gasoline demand over the past four weeks was up by more than 5 percent.

U.S. crude futures were up 68 cents to $67.39 a barrel by 1455 GMT, bouncing from a brief sell off after a surprise fall in business activity in the U.S. Midwest, including Chicago, dragged down the equity market.

London Brent crude gained 46 cents to $65.96 a barrel.

The real surprise was the draw on gasoline stocks. It's certainly a positive sign for gasoline prices and implied gasoline demand is also up, said Addison Armstrong, director of market research with Tradition Energy in Connecticut.

But he and other analysts said inventories of crude oil and middle distillates, such as heating oil and diesel, rose and demand for such oil products overall still remained weak.

Crude oil inventories increased by 2.8 million barrels last week, surpassing analysts' forecast for a 600,000 barrel rise. The increase in middle distillate inventories was smaller than expected, but demand over past four weeks was more than 9 percent lower than a year earlier.

The report is actually mixed, Olivier Jakob with Swiss-based Petromatrix said. Overall inventories increased and keep building up.

Given that overall oil demand remained slack, the U.S. dollar and equities may come back to influence the oil market, Jakob said.

Further support came from a weak dollar and political tensions related to Iran, OPEC's number two producer, analysts said, ahead of a meeting between diplomats from the five permanent U.N. Security Council members as well as Germany and Iran's nuclear negotiator.

(Additional reporting by Christopher Johnson; Editing by Keiron Henderson)