Oil prices rose Wednesday after the government reported inventories fell last week. There is still plenty of oil on hand, as supplies remained well above the five-year average.
Benchmark crude for November delivery gained $1.20 at $77.38 a barrel in midday trading on the New York Mercantile Exchange.
Meanwhile, the national average for a gallon of regular gasoline didn't change much overnight at $2.692, according to a survey by AAA, Wright Express and the Oil Price Information Service. The price is almost 3 cents lower than it was a week ago but over 20 cents more than a year ago.
The Energy Department said commercial crude inventories decreased by 500,000 barrels to 357.9 million barrels, according to the Energy Information Administration said. The total was about 5.7 percent above year-ago levels.
Gasoline inventories shrank by 3.5 million barrels to 222.6 million barrels, 5.3 percent above year-ago levels. Demand for gasoline over the four weeks that ended Sept. 24 averaged 9.1 million barrels a day, an increase of nearly 1 percent from the same period of 2009.
Inventories of distillate fuel, which include diesel and heating oil, fell by 1.3 million barrels to 173.6 million barrels, which was 1.5 percent above year-ago levels, the government reported.
"The face value of the report looks price supportive. However, even after these draws, we still have huge supply surpluses anywhere you look," said oil analyst Jim Rittersbusch, president of Ritterbusch and Associates. "Everybody's yawning again, and going back and watching to see what the stock market does."
The oil market has remained stable, with September prices ranging between $73 a barrel and $78 a barrel. It's a trend analysts expect to continue as traders wait for signs of an improving economy and stronger demand that would tap into supplies.
Traders have been watching stock markets for clues about the recovery in the months ahead. The Dow Jones Industrial Average, S & P 500 and the NASDAQ were all slightly lower after worries about Europe resurfaced with protests in Brussels, Spain and Ireland over austerity measures aimed at preventing another fiscal crisis.
In other Nymex trading in October contracts, heating oil rose 4.55 cents to $2.1700 a gallon and gasoline gained 2.86 cents at $1.9765 a gallon. Analysts expect both contracts to be active since they expire Thursday. Natural gas for November delivery lost 4 cents at $3.910 per 1,000 cubic feet.
In London, Brent crude rose $1.37 to $80.08 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi and Alex Kennedy in Singapore contributed to this report.