* U.S. gasoline and distillate stocks fall, crude rises

* OPEC decides to leave output targets unchanged

* OPEC pumping above quotas to meet rising demand - Saudi

* Russia's Rosneft faces export deadlock

* Coming up: Oil inventory for Cushing, OK, from Genscape (Recasts, updates prices at settlement, adds quote)

By David Sheppard and Ed McAllister

NEW YORK, March 17 (Reuters) - Oil rose more than 1 percent to end near $83 a barrel on Wednesday after a U.S. government report showed increased oil product demand and as OPEC decided to leave output targets unchanged.

A weaker U.S. dollar against a basket of currencies also provided support, following Tuesday's U.S. Federal Reserve decision to keep low interest rates steady.

U.S. crude for April delivery CLc1 gained $1.23 to settle at $82.93 a barrel. London Brent crude LCOc1 rose $1.43 to settle at $81.96.

Data from the U.S. Energy Information Administration (EIA) on Wednesday showed oil product demand in the world's largest energy consumer was up 3.5 percent last week from a year ago.

A 1.7 million-barrel drop in gasoline stocks and a 1.4 million-barrel drop in heating oil stocks was partly offset by a 1.1 million-barrel rise in crude oil inventories. [EIA/S]

"Today's EIA data reaffirms improving demand and fundamentals for the energy complex, led by gasoline," said Chris Jarvis, senior analyst at Caprock Risk Management. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

OPEC compliance with production cutbacks

Weekly crude inventory data for the Cushing, Oklahoma, oil hub from Genscape is due out Thursday at 10:30 a.m. EDT (1430 GMT).

The dollar fell against a basket of currencies on Wednesday as investors sought better returns elsewhere. [USD/] The U.S. Federal Reserves' commitment to low interest rates on Tuesday lifted optimism and helped push up U.S. markets. [.N]

"A renewed appetite for risk is currently spurring much of the price strength and is tied in with strong global equity markets and a soft U.S. dollar," said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.

Earlier on Wednesday, Saudi Arabia's Oil Minister Ali al-Naimi described current prices as "beautiful" as the OPEC producer group decided to leave record output curbs unchanged at its meeting in Vienna.

Members of the Organization of the Petroleum Exporting Countries, which pumps roughly one in every three barrels of oil, maintained official cuts of 4.2 million barrels per day (bpd). [ID:nLDE62G0Q8]

Since curbing output in December 2008 as the economic crisis intensified, OPEC has seen prices rally from below $40 a barrel to a peak of $83.95 in January, despite lower compliance from some members in recent months.

Naimi said global oil demand will grow by about 1 million bpd by the second half of this year

"Good demand, reliable supply, beautiful prices -- we are very happy," Naimi said. [ID:nLDE62G0SZ]

"Everything is relative -- if there was no demand, there would be no leakage," Naimi said.

A nascent recovery in the global economy and higher prices has encouraged revenue-hungry OPEC members to pump more oil. In February, they were making just 53 percent of promised cuts.

Saudi Arabia, OPEC's largest producer, has previously said oil near $75 a barrel is necessary to encourage investment in future supplies to meet booming demand from emerging economies, and is ultimately good for both producers and consumers.

But rising prices at the pumps have threatened to squeeze consumers still struggling in the aftermath of the worst recession for 70 years.

Retail gasoline prices in the United States soared to their highest level in nearly 18 months last week and could soon top $3 a gallon, the U.S. Department of Energy said on Monday. Unemployment in the world's largest energy consumer is almost 10 percent. [ID:nN15217382]

Oil prices were boosted further by news that Russian oil major Rosneft ROSN.MM faces a possible export deadlock after bankrupt rival YUKOS won U.S. and British court injunctions making cash payments to the state oil company in the West very complex, market sources said on Wednesday. [ID:nLDE62F22Z]