Oil rose more than 4 percent Wednesday after the government said crude supplies shrank more than expected last week and a new report forecast strong global demand.
Crude was higher even though stocks fell. The major indexes on Wall Street were off more than 3 percent. Recently oil and stocks have tended to move in the same direction as energy traders gauged sentiment about the economy — and energy demand — from the rise and fall of stocks.
Benchmark West Texas Intermediate crude rose $3.59, or 4.5 percent, to settle at $82.89 a barrel on the New York Mercantile Exchange. Brent crude, used to price many international types of oil, gained 4.11, or 4 percent, to settle at $106.68 per barrel on the ICE Futures exchange in London.
Andrew Lebow, MF Global senior vice president, said he expects oil prices to swing from gains to losses until there is more stability in the stock markets.
The Energy Department's Energy Information Administration said Wednesday that U.S. crude supplies fell last week by 5.2 million barrels. Analysts had estimated that supplies would rise by almost 2 million barrels, but refineries used more crude than expected.
Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates said oil got a boost from the EIA report. He suggested though that oil was oversold and due to rise, because it has fallen so much in recent weeks. Benchmark crude has lost about $17 a barrel since the end of July.
The International Energy Agency on Wednesday followed OPEC's lead and trimmed its outlook for the growth of global oil demand this year. At the same time IEA raised its forecast for 2012. OPEC said Tuesday that demand for oil will grow at a slower pace this year than it previously thought and rise further next year.
Many experts agree that most of the demand for oil will come from China and other regions outside the U.S. and Europe. A new report from Barclays Capital said China's oil demand rose 7.4 percent in July from a year ago. China is the world's second largest oil consumer behind the U.S.
In other Nymex trading in September contracts, heating oil rose 10.05 cents to settle at $2.8653 a gallon, gasoline gained 11.49 cents to settle at $2.7825 a gallon and natural gas added 0.9 cent to settle at $4.003 per 1,000 cubic feet.
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