Oil rose on Wednesday as stock market gains raised optimism about the economy, offsetting concerns about rising inventories and weak demand in top consumer the United States.

U.S. crude settled up 71 cents at $70.16 a barrel. London Brent crude rose 43 cents to settle at $72.89 a barrel.

The gains came as global stock markets posted a broad rally, led by technology and home-building shares after positive outlooks from semiconductor product manufacturer Applied Materials Inc and luxury home builder Toll Brothers Inc. <.N>

It's pretty clear that the fundamental picture remains bearish, but it remains to be seen when crude prices will react accordingly, since they have continued to react to (a rise in the) S&P stocks and the weakening dollar, Addison Armstrong, director of market research at Tradition Energy, said.

Oil trimmed gains after the U.S. Federal Reserve in its policy statement said the U.S. economy is leveling out and that it was extending purchases of long-term U.S. Treasury debt to the end of October. The dollar rose against the yen following the Fed statement.

Traders were also eyeing reports from the National Hurricane Center that the Atlantic could get its first named storm of the year as a tropical depression strengthens on a track toward the U.S. Virgin Islands.

Tropical storms and hurricanes can disrupt the operations of offshore oil platforms and coastal refineries.

Oil's strength came despite a report from the U.S. Energy Information Administration showing U.S. crude oil inventories rose 2.5 million barrels in the week to August 7, well over analysts' expectations for a 700,000 barrel build.

The build came as U.S. refiners cut back on runs with the recession keeping total product demand below year-ago levels.

Despite some positive economic signs, the International Energy Agency (IEA) forecast global oil demand growth will be lower in 2010 than previously expected, with little evidence a recovery is under way yet.

The Paris-based agency, adviser to 28 industrialized nations, said global oil demand was now seen recovering by just 1.3 million barrels per day (bpd) in 2010, having fallen by 2.3 million bpd this year as the economic crisis curbed consumption.

Evidence of a bottoming out of the recession is still a bit patchy. The latest data on industrial production for some of the larger countries remains negative, David Martin, analyst at the IEA, told Reuters.

There is not clear evidence yet we have seen the worst.

(Reporting by Matthew Robinson, Robert Gibbons, Richard Valdmanis and Gene Ramos in New York City; David Sheppard in London; Maryelle Demongeot in Singapore; Editing by Jim Marshall)