NEW YORK ( TheStreet) -- Crude oil for April delivery settled above $80 a barrel Wednesday despite a larger-than-expected surge in inventories. A weaker U.S. dollar and improving economic conditions fueled the rise. The Energy Information Administration said oil inventory levels surged higher by 4.1 million barrels last week, reaching a total of 341.6 million. Platts forecast a rise of 1.1 million barrels. Gasoline stocks swelled by 700,000 barrels, well beyond estimates for a 160,000-barrel jump. Distillate inventories fell by 900,000 barrels; analysts anticipated a 975,000-barrel drawdown. An uptick in refinery operations provided a bright spot, as the utilization rate edged higher to 81.9% despite predictions for a tenth of a percentage point drop to 81.1%. Still, with few hints of improving demand, investors appeared to shrug off the supply news as the April delivery contract for crude added $1.19, or 1.5%, to settle at $80.87 a barrel. Other Nymex products also improved. The April heating oil contract gained nearly 4 cents, or 1.8%, to settle at $2.09 a gallon, and the April gasoline contract rose by 5 cents, or 2.3%, to settle at $2.25 a gallon. Gene McGillian, analyst at Tradition Energy, said the crude market is "focusing on broader forces in the economy," with oil getting a lift today from the slumping dollar and strengthening equities. The euro strengthened against the greenback after Greece offered a mix of reduced spending and rising taxes to shore up the country's mounting deficits. The dollar index, which tracks the dollar against a basket of currencies, fell 0.6%. Stocks rose in the morning trading session, buoyed by an
improving labor market picture and growth in the service sector . The energy sector was one of the day's best performers, with the NYSE Arca Oil Index gaining 0.4%. Oil service sector stocks showed particular strength after the EIA report, suggesting that news of the better refinery-utilization rate helped lift stocks. The Philadelphia Oil Services Sector Index rose 1.3% higher, led by sharp gains from Cameron International ( CAM), Nabors Industries ( NBR), Halliburton ( HAL) and Weatherford International ( WFT). Natural gas for April delivery gained 5 cents, or 1%, to settle at $4.76 per million British thermal units, ahead of a separate EIA report on those storage levels due Thursday morning. Analysts polled by Platts are anticipating a withdrawal of 128 to 132 billion cubic feet in the week ended Feb. 26. --Written by Sung Moss and Melinda Peer in New York.