NEW YORK — Oil prices climbed more than 5 percent, surpassing $70 a barrel Wednesday after a government report said the nation's gasoline supply dropped unexpectedly and demand increased from last year.
Benchmark crude for November delivery added $3.90 to settle at $70.61 a barrel on the New York Mercantile Exchange. Brent crude rose $3.58 to settle at $69.07 a barrel on the ICE Futures exchange in London.
The Energy Information Administration put U.S. gasoline stockpiles at 211.5 million barrels last week, a drop of 0.8 percent from the prior week. It also said demand for gasoline over the four weeks ended Sept. 25 was 5.4 percent higher than last year.
The price of oil, which is used to make gasoline, rose as investors placed some final bets on the last day of the quarter. Crude prices have waffled between $59 and $75 during the past three months, but equities markets surged during the quarter as investors became increasingly confident that the economy was healing.
Despite the drop last week, gasoline supplies are still considered to be well above normal. They're nearly 11 percent higher than they were last year, and much of last week's drop came as many U.S. refiners cut back on their operations.
Petroleum supplies have been growing most of the year as trucking companies shipped fewer goods, and a growing number of unemployed workers kept their cars out of the morning commute.
"There's nothing inspiring about oil demand right now," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Crude supplies grew more than expected last week, according to the government report, and they've now swelled to 11.4 percent above what they were last year.
It's unclear when Americans will regain their appetite for petroleum.
Though Federal Reserve Chairman Ben Bernanke said the recession is "very likely over," the unemployment rate is still expected to top 10 percent this year, forcing the economy to recover at a sluggish pace.
The Commerce Department reported Wednesday that the economy shrank in the spring at a pace of 0.7 percent, which was not as bad as analysts had expected. But the Chicago Purchasing Managers Index showed that the Midwestern manufacturing sector was weaker than expected.
At the pump, retail gas prices fell by less than a penny overnight to a new national average of $2.479 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular gas is 13.1 cents cheaper than last month and $1.154 less than in the same period last year.
In other Nymex trading, gasoline for October delivery rose 9.78 cents to settle at $1.7259 a gallon, and heating oil advanced 9.54 cents to settle at $1.796 a gallon. Natural gas gave up 3.4 cents to settle at $4.841 per 1,000 cubic feet.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.