NEW YORK (CNNMoney.com) -- Oil prices turned higher Wednesday after the Fed announced it would keep rates low, overshadowing Greek woes and a mixed inventory report.
What prices are doing: Crude prices rose 78 cents to settle at $83.22 a barrel.
Prices plummeted Tuesday after Greek and Portuguese debt was downgraded. Crude is essentially unchanged in the past week, but up 63% from this time last year.
What's moving the market: Prices began the trading day lower amid concerns over debt problems in Europe and slack demand, but turned after the Fed's rate decision.
The Federal Reserve decided to keep its target for the fed funds rate unchanged at near 0% for an "extended period." The Fed cited stable inflation and still sluggish jobs and housing markets as driving factors for the decision.
Earlier, oil prices were weighed down by a bearish inventory report and by Spain's sovereign debt downgrade.
The Energy Information Administration said that U.S. crude oil stockpiles increased by 1.9 million barrels. Fuel inventories of distillates - used for heating oil and jet fuel - rose by 2.9 million barrels, while gasoline stocks fell by 1.2 million barrels.
Analysts had expected crude supplies to rise by 1.4 million barrels, distillates stocks to climb by 1.2 million barrels, and gasoline supplies to jump by 500,000 barrels, according to research firm Platts. Higher supplies indicate slack demand, which pushes down oil prices.
What analysts are saying: "Go figure," said Stephen Schork, a commodities analyst at The Schork Group. "Commodities are more vulnerable to the latest economic headlines these days. It's a speculator-driven market."
Before Tuesday's steep drop, crude prices struggled to find a definitive direction as traders balanced optimistic economic and earnings news with pessimistic news from abroad. Bullish market news would usually bolster oil prices as traders speculate that higher demand will follow.
But the stubborn weekly increases in crude inventories suggest that the economy is not yet out of the woods and problems in Europe have plagued the global markets, sending the dollar higher and pressuring oil demand further.
Schork says that crude prices are now trading at the bottom of the current trading range, but could climb to recent ceilings of $87 to $88 a barrel, as Europe's problems spur a massive flight to quality.
"Fears of Europe could cause a flight toward hard assets...crude, gold, real estate, and metals," he said.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.80%||3.88%|
|15 yr fixed||3.20%||3.23%|
|30 yr refi||3.82%||3.93%|
|15 yr refi||3.20%||3.23%|
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