Oil prices briefly rose to a record $80 a barrel in afternoon trading Wednesday after the government reported a surprisingly large drop in crude oil inventories and declines in gasoline supplies and refinery activity.
U.S. light, sweet crude for October delivery gained $1.48 to $79.71 on the New York Mercantile Exchange, after hitting $80 earlier.
London October Brent crude gained on the ICE Futures Exchange.
However, oil is still well below inflation-adjusted highs hit in early 1980. Depending on the metric used, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
In its weekly report on petroleum inventories, the Energy Department's Energy Information Administration said crude oil supplies fell by 7.1 million barrels in the week ended Sept. 7, more than twice the 2.7 million-barrel decline analysts surveyed by Dow Jones Newswires, on average, had expected.
Oil's advance has been largely due to speculative buying by big investment funds, who are responding to a price structure in which oil contracts for delivery in future months are cheaper than the current front-month contract, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.
That kind of structure, known in market-speak as "backwardation," signifies tight demand in the immediate future, and is a buying incentive. Investors who buy now will end up with more oil contracts later, when October futures roll over to cheaper contracts for delivery in later months, Ritterbusch said.
"This is a market that wants to run up on the slightest bit of information," Ritterbusch said.
Prices were also being supported by worries a tropical depression that formed in the western Atlantic on Wednesday will become a hurricane and hit critical Gulf oil and gas infrastructure.
"The National Hurricane Center says there's a good chance that could get into the Gulf," Ritterbusch said.
Gasoline inventories fell by 700,000 barrels, slightly more than the expected 500,000 barrel decline.
Refinery utilization fell by 1.6 percentage points to 90.5% of capacity. Analysts had expected a 0.1 percentage point decline. And inventories of distillates, which include heating oil and diesel fuel, grew by 1.8 million barrels, more than the 1.4 million-barrel increase analysts had expected.
Crude imports fell by 674,000 barrels a day on average last week to 9.56 million barrels, while gasoline imports fell an average of 298,000 barrels a day to 1.02 million barrels a day.
Demand for gasoline averaged about 9.6 million barrels a day over the last four weeks, about 0.9% above last year, EIA said.