Oil price jumps more than $4 after surprise drop in U.S. crude supply

Oil prices rose Wednesday after a government report said U.S. crude supplies shrank unexpectedly last week.

Price remains about $30 US below record high of $147.27

Oil prices jumped more than $4 US a barrel Wednesday after a government report said U.S. crude supplies shrank unexpectedly last week.

Light, sweet crude for September delivery moved as high as $117.43, up $4.42, on the New York Mercantile Exchange.

After a month-long slide, it was still about $30 below its July 11 high of $147.27.

The U.S. Energy Information Administration said crude stockpiles fell by 400,000 barrels to 296.5 million barrels for the week ending Aug. 8. Analysts surveyed by energy research firm Platts had expected crude supplies to rise by 500,000 barrels.

The EIA also said gasoline supplies fell by 6.4 million barrels to 202.8 million barrels last week, much more than the 2.2 million barrel drop analysts had predicted.

The news apparently outweighed factors that might have led oil prices downward.

A ceasefire declared by Russia and Georgia in their conflict over South Ossetia appeared to have reduced any concerns that hostilities there would have a major effect on oil shipments through Georgia.

The International Energy Agency lowered its forecast on Tuesday for oil product demand from 30 developed countries, located mostly in Europe and North America, to 48.6 million barrels a day, down 1.3 per cent from last year.

The Paris-based energy watchdog's report arrived a day after China said its crude imports in July, while historically strong, were down 7 per cent from the same month last year.

The IEA cautioned that it is too early to determine whether the recent fall in oil prices is a longer-term trend. It said demand in developing countries could offset declines in developed nations, and that it sees Chinese oil demand continuing to grow at a robust pace.