* EIA reports decline in U.S. crude inventories
* Cyprus throws bailout into disarray, seeks Russian help
* U.S. Fed to press forward with stimulus program
By Joshua Schneyer
NEW YORK, March 20 Brent crude oil rose above
$108 a barrel on Wednesday, recovering from a three-month low,
after the U.S. Federal Reserve signalled it would continue its
stimulus programs and on optimism that European policymakers can
keep a debt crisis in Cyprus from spreading.
The Federal Reserve wrapped up a two-day meeting on
Wednesday by pressing forward with its aggressive efforts to
stimulate the U.S. economy, saying it would take into account
risks posed by its policies but also how much progress it was
making lowering unemployment.
Cyprus was seeking a new loan from Russia to avert a
financial meltdown, after the island's parliament rejected the
terms of a European Union bailout, raising the risk of default
and a bank crash.
Brent crude for May rose $1.27 to settle at $108.72
a barrel. It had dropped nearly 2 percent to a three-month low
on Tuesday. U.S. crude for April rose 80 cents to $92.96
"Clearly, market players anticipate that an alternative
solution will be found for Cyprus," said Carsten Fritsch,
analyst at Commerzbank. "Nonetheless, the uncertainty
surrounding this issue is likely to continue to keep oil prices
in check in the short run."
Oil prices also rose on Wednesday in the hours after the
U.S. Energy Information Administration said crude stocks fell by
1.3 million barrels last week, rather than the 2.0
million-barrel increase analysts had expected. The report showed
a drop in U.S. crude imports.
"We saw a drawdown in crude, which was a little surprise and
would be supportive (for oil prices)," said Phil Flynn, analyst
at Price Futures Group in Chicago.
The EIA report also showed declines in U.S. gasoline and
distillate fuel stocks, although these were smaller than
On the price charts, Brent faces its first upward resistance
point at $108.50, said Olivier Jakob, oil analyst at
Petromatrix. Support levels to watch on Wednesday are $107.50
and then 107.00, he said.
The uncertainty about Cyprus's finances has revived concern
about the stability of the euro zone and of the downside risks
to global economic growth.
The U.S. dollar weakened by 0.3 percent on Wednesday against
a basket of foreign currencies. A weaker dollar tends to
support the price of oil and other dollar-denominated