Oil rises on US fuel demand, Fed rate decision caps gains

Oil prices edged up on Wednesday after U.S. government data showed a draw in fuel inventories, but the Federal Reserve's decision to hold interest rates steady capped gains.

Brent crude futures settled up 22 cents, or 0.31%, to $70.78 a barrel. U.S. West Texas Intermediate crude (WTI) closed 26 cents, or 0.39%, higher at $67.16.

U.S. crude stocks rose by 1.7 million barrels last week to 437 million barrels, U.S. government data showed, exceeding the 512,000-barrel rise analysts had expected.

However, distillate inventories, which include diesel and heating oil, fell by 2.8 million barrels last week to 114.8 million barrels, far surpassing expectations for a 300,000-barrel drop.

"The EIA showed a net draw including products, which is incrementally bullish," said Josh Young, chief investment officer at Bison Interests.

The Israeli military resumed ground operations in the central and southern Gaza Strip, a day after local health workers said more than 400 Palestinians were killed in airstrikes that shattered a ceasefire.