Oil prices settle higher, above $87 per barrel

Oil prices rose past $87 a barrel on Wednesday, as investors focused on President Barack Obama's ideas for more jobs and overhaul corporate taxes.

Benchmark oil for February delivery rose $1.14 to settle at $87.33 a barrel in afternoon trading on the New York Mercantile Exchange.

Traders took their cue from the stock market, which moved higher on Obama's call in the State of the Union address to close corporate tax loopholes and lower business tax rates. The Dow Jones Industrial Average topped 12,000 for the first time since June, 2008. The Standard & Poor's 500 index and the Nasdaq composite index also rose.

In its weekly report, the Energy Department said supplies of oil and gasoline rose more than expected last week. Crude supplies expanded by 4.8 million barrels to 340.6 million barrels. Gasoline supplies rose by 2.4 million barrels to 230.1 million barrels, while demand in the past four weeks increased 1.1 percent. Supplies of distillate fuel, which includes diesel and heating oil, declined by 100,000 barrels to 165.7 million barrels.

U.S. refineries ran at 81.8 percent of total capacity on average, which was a decline of 1.2 percent from the previous week.

Crude supplies grew last week as imports rose from the previous week, and refineries used less crude as they slowed operations for regular maintenance.

Higher-than-expected supplies can drive down oil prices, but prices have dropped over the last four trading sessions and investors seemed unfazed by Wednesday's report.

"The short-term trend (in oil prices) still looks to be down but these numbers should have given us more of a push lower and it really hasn't done much," said Tom Bentz, an analyst at BNP Paribas Commodity Futures.

At the pump, the national average for regular gasoline was a fraction lower from Tuesday, at $3.106 a gallon, according to AAA, Wright Express and the Oil Price Information Service. That's 6.4 cents more than a month ago and 40.6 cents above a year ago. Gas prices across the country range from $2.823 a gallon to $3.697 a gallon.

The dollar weakened against other currencies a day after successful debt sales by Spain and Europe's rescue fund helped support the euro. Commodities are priced in dollars so a weaker dollar can make them more of a bargain for buyers who use other currencies.

In other Nymex trading in February contracts, heating oil rose 7.47 cents to settle at $2.6713 a gallon, and gasoline added 8.6 cents to settle at $2.4566 a gallon. Natural gas for March delivery gained 1.1 cents to settle at $4.501 per 1,000 cubic feet.

In London, Brent crude rose $2.66 to settle at $97.91 a barrel on the ICE Futures exchange.