Oil prices waded into uncharted territory above $80 US a barrel  Wednesday after the U.S. government reported a big drop in crude oil inventories.

Crude oil futures for October delivery settled at $79.91 US, up $1.68 US from Tuesday's New York settle price. Earlier in the day, the price briefly touched $80.18 US.  That easily tops the previous intraday record oil price of $78.77 US a barrel, set on July 31.

While Wednesday's price level does amount to a new all-time high, analysts point out that when inflation is taken into account, it falls short of record ground.

During the oil supply shock that followed the Iranian revolution in 1979, inflation-adjusted oil prices rose to about $100 US a barrel level in 2007 dollars.

The latest move up was prompted by the morning release of supply figures by the U.S. Energy Information Administration. They showed an unexpectedly large drop of 7.1 million barrels in crude inventories in the past week. Analysts had been forecasting a drop of only 2.7 million barrels.

Inventories of gasoline fell by a more-than-expected 700,000 barrels and refineries were also less active. Refinery utilization fell by 1.6 percentage points to 90.5 per cent of capacity, the EIA said. A drop of just 0.1 percentage point had been expected.

The TSX energy index was up 1.4 per cent in mid-afternoon trading — making it the best-performing sector on the exchange.