Oil futures extended their gains Wednesday after the government posted a steep drop in U.S. oil inventories last week.
The decline was mostly due to falling imports rather than strengthening demand. But the sheer size of the drop was enough to send prices higher, market watchers said.
Light, sweet crude for November delivery traded up $2.74, or 3.6%, to $78.41 U.S. a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe exchange rose $2.42, or 2.4%, to $102.22 U.S. a barrel.
Oil inventories last week fell 4.7 million barrels, the Department of Energy said in its closely watched weekly survey. Gasoline inventories dropped 1.1 million barrels, while stockpiles of distillates, which includes heating oil and diesel, declined 700,000 barrels.
The decline bucked analyst expectations for a 700,000-barrel increase in crude-oil inventories. Analysts expected gasoline stocks to rise by 1 million barrels, while distillate stocks were seen falling 100,000 barrels, according to a survey by Dow Jones Newswires
Futures had started the day higher on a report that the private sector added jobs last month, a rare piece of good news for the economy of the world's biggest oil consumer.
Automatic Data Processing said 91,000 new jobs were added in the private sector last month, which ADP described as "modest job creation." Economists were expecting an increase of 75,000 jobs.
The economic slowdown in the U.S. and the sovereign-debt crisis in Europe have weighed heavily on oil prices in recent months. Nymex crude futures settled at their lowest level in a year Tuesday, while Brent futures ended below $100 U.S., amid worries that the flagging global economy is curbing demand for the products made from oil, such as gasoline and petrochemicals.
In another sign that gasoline demand remains crimped by the weak economy, a SpendingPulse report released Tuesday said U.S. weekly demand fell 2% during the week ended Sept. 23.
Market participants, however, were encouraged Wednesday by signs of progress in Europe. Reports that European Union finance ministers are looking into coordinating recapitalization of the region's troubled banks lifted sentiment.
Front-month November reformulated gasoline blendstock, or RBOB, recently traded up 5.59 cents, or 2.3%, to $2.5443 U.S. a gallon. November heating oil traded up 3.38 cents, or 1.3%, to $2.7572 U.S. a gallon.
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