Oil prices rose sharply Wednesday, wiping out a week's worth of declines after the government said supplies of oil and petroleum products dropped much more than expected.
Benchmark crude for January delivery surged by $1.97, nearly 3 percent, to settle at $72.66 a barrel on the New York Mercantile Exchange. In London, Brent crude for January delivery added $1.50 to settle at $73.55 a barrel on the ICE Futures exchange.
The Energy Information Administration said that crude supplies fell by 3.7 million barrels last week and distillate fuels including heating oil dropped by 2.9 million barrels. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected more moderate draws of 2 million barrels of crude and 750,000 barrels of distillates.
Refineries tend to try to get rid of as much crude as possible toward the end of the year to avoid paying higher taxes. But heating oil supplies also dropped as frigid temperatures blanketed the Midwest and Northeast.
"The cold weather has really been pushing prices right now," analyst Peter Beutel said.
At the pump, retail gas prices fell by less than a penny overnight to a new national average of $2.594 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 3.7 cents cheaper than it was last month, but it's 93.3 cents more expensive than the same time last year.
In other Nymex trading in January contracts, heating oil climbed 6.25 cents to settle at $1.9658 a gallon while gasoline gained 2.88 cents to settle at $1.8739 a gallon. Natural gas lost 6.1 cents to settle at $5.462 per 1,000 cubic feet.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.