Oil prices sailed higher Wednesday as improvement in the manufacturing industry eased some fears about the strength of the global recovery.
Benchmark oil for October delivery rose $2.09, or 2.9 percent, to $74.01 in midday trading on the New York Mercantile Exchange.
At the pump, Wednesday's national average was $2.678 for a gallon of unleaded regular gasoline, according to AAA, Wright Express and Oil Price Information Service. That's about 5.7 cents less than a month ago and 7.1 cents higher than a year ago.
After the Energy Department issued its weekly report on crude inventories, traders dismissed another big rise in supplies and focused on the stock markets for signs of where the economy may be headed in the next few months.
The Dow Jones industrial average jumped more than 220 points and broader indexes rose more than 2 percent following encouraging news about manufacturing activity.
Although several regional manufacturing indexes turned in weaker numbers in recent weeks, the Institute for Supply Management said Wednesday that its index rose to 56.3 last month, compared to 55.5 in July. A reading above 50 indicates growth.
Another report on Wednesday showed stronger growth in Chinese manufacturing and auto sales. That is an indication that economic growth may not be slowing in that big oil-consuming country as much as had been expected.
Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said the reports gave traders more of a risk appetite to buy oil despite plentiful supplies.
The Energy Department said crude stockpiles rose 1 percent to 361.7 million barrels for the week that ended Aug. 27, the government reported Wednesday. That's about 5.3 percent more than a year ago.
Gasoline inventories fell by 200,000 barrels to 225.4 million barrels, which about 10 percent above year-ago levels.
Inventories of distillate fuel, which include diesel and heating oil, fell by 700,000 barrels to 175.2 million barrels.
Tradition Energy analyst Gene McGillian said there also seems to be some volatility in the market ahead of the Labor Day weekend.
In other Nymex trading in October contracts, heating oil rose 6.29 cents to $2.0546 a gallon, gasoline gained 3.83 cents at $1.8957 a gallon and natural gas added 2.9 cents at $3.845 per 1,000 cubic feet.
In London, Brent crude rose $1.91 to $76.55 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi and Alex Kennedy in Singapore contributed to this report.