Oil rises on stimulus package

NEW YORK (CNNMoney.com) -- Oil prices rose Thursday after Congressional leaders and White House officials announced an economic stimulus package, easing some of the market's fears that a downturn will crimp demand.

U.S. light crude for March delivery rose $1.57 to $88.56 a barrel on the New York Mercantile Exchange. Oil had traded up 77 cents just prior to the report's release.

In its weekly inventory report, the Energy Information Administration said crude stocks rose by 2.3 million barrels last week. Analysts were looking for a gain of 1.8 million barrels, according to a Dow Jones poll.

Gasoline supplies surged 5 million barrels, compared to analysts' expectations of 1.6 million barrels.

Distillates, used to make heating oil and diesel fuel, fell by 1.3 million barrels. Analysts had forecast a rise of 100,000 barrels.

"The dip in distillates is helping to support the market, " said Phil Flynn, a senior market analyst at Alaron Trading.

"Cold weather keeps supplies at uncomfortably low levels," he added.

However, Ray Carbone, president of Paramount Options, thinks Thursday's inventory report is "probably a non-event."

"We're really focused on the equity market right now," he added.

Investors in oil futures pay close attention to the stock market as a gauge of overall economic activity. The U.S. equity market has been plagued by recession fears that have led to instability in markets worldwide.

A rally in Asian and European markets Thursday helped drive oil above $88 a barrel in electronic trade.

The Dow Jones industrial average was nearly 0.2 percent higher more than halfway into Thursday's session. Meanwhile, the tech fueled Nasdaq, which reached bear market proportion in the previous session by being down more than 20 percent from its latest high, was up about 0.9 percent.