Oil prices jumped following a government report that showed a massive decline in U.S. crude stockpiles last week.
The U.S. Energy Information Administration said oil inventories fell by 10.6 million barrels to 324 million barrels, the largest weekly drop since February 2001 and a three-year low.
Futures finished Wednesday $1.43, or 1.5%, higher on the day at $98.67 a barrel on the New York Mercantile Exchange. In the minutes after the report's release, oil prices surged as high as $99.25.
Crude inventories fell by 10.6 million barrels, the largest weekly drop since February 2001. Above, an oil-storage facility in Cushing, Okla.
In its report, the EIA is measuring how much crude-oil supplies refiners and others have on hand. When crude prices rise over the calendar year, refiners and other companies are subject to higher taxes because any additional barrels they have added to inventory during that year are valued at the end-of-year oil price. Analysts say some companies try to get rid of some inventory to pare their tax liability.
Nonetheless, the drop was so big—analysts had estimated a decline of 2.4 million barrels—that others said it raised questions about whether U.S. refineries could continue to process crude into petroleum products for export without upward pressure on prices.
"A 10 million-barrel draw in crude inventories is massive," said Peter Donovan, vice president and broker at Vantage Trading in New York. "Guys on the floor were definitely taken aback."
U.S. crude stockpiles have fallen by more than 45 million barrels from a 2011 peak of 369 million barrels in June. Demand for fuel products globally has prompted domestic refineries to churn out diesel for export to Europe and developing markets, such as Brazil.
"It's a combination of events that got the market higher," said Andy Lipow, president of Lipow Oil Associates, an energy market consultancy. "It might have started off with the inventories, but the market is also nervous about the supply side of the equation."
Prices rose more than 3% Tuesday on worries that supplies from Iran, the world's third-largest exporter, could be crimped by possible sanctions. And in Kazakhstan, antigovernment clashes between laid-off oil workers and security forces have led to concerns that the country's oil exports could be curtailed.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com