Oil prices rose Wednesday as the U.S. dollar weakened against other major currencies.

The U.S. dollar fell against most major currencies Wednesday ahead of the U.S. retail sales data for May, which is seen as another indicator for whether the Federal Reserve would begin to taper its stimulus program.

A weaker greenback makes the dollar-denominated oil cheaper to foreign buyers and boosts oil's appeal as an investment alternative.

The Energy Information Administration said Wednesday that U.S. crude inventories increased 2.5 million barrels last week to 393.8 million barrels. That surprised the market as the expectation is a modest decline of 400,000 barrels. Gasoline supplies also climbed 2.7 million barrels to 221.5 million barrels, an eight-week high.

The International Energy Agency (IEA) based in Paris, France, trimmed demand forecasts Wednesday, predicting that oil demand would expand by 785,000 barrels per day to 90.6 million barrels daily this year, due to the sluggish global economic growth.

IEA's forecast is in line with the Organization of Petroleum Exporting Countries which said Tuesday it expected the world's oil demand to reach 89.65 million barrels per day this year, down from its prior forecast of 89.66 million barrels per day.

On the economic front, U.S. mortgage applications increased 5.0 percent for the week ending June 7, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

Light, sweet crude for July delivery gained 50 cents, or 0.52 percent, to settle at 95.88 dollars a barrel on the New York Mercantile Exchange.

Brent for July delivery went up 53 cents, or 0.51 percent, to close at 103.49 dollars a barrel.