NEW YORK (CNNMoney.com) -- Oil prices hit a fresh intraday record high Wednesday, passing $80 a barrel for the first time ever, after the government said supplies of crude oil fell far more than expected.
U.S. light crude for October delivery set a trading high of $80.18 late in the session before pulling back slightly to settle at $79.91 a barrel, still up $1.68 a barrel and another record close. The old trading high was $78.77 a barrel hit Aug. 1.
In its weekly inventory report, the Energy Information Administration said crude stocks plunged by 7.1 million barrels last week. Analysts were looking for a drop of 2.7 million barrels according to a Dow Jones poll.
A reported slowdown in production from Alaska's North Slope, as well as a gathering storm in the Gulf of Mexico also pushed prices higher.
Traders have been focused on crude inventories in developing countries over the last several weeks as OPEC production cuts from this past winter and an increase in refining activity have eaten into supplies.
Still, EIA said crude inventories in the United States remain above average for this time of year.
Distillates, used to make heating oil and diesel fuel, rose by 1.8 million barrels while gasoline supplies fell by 700,000 barrels. Analysts were looking for a 1.4 million barrel increase in distillates supplies and a 500,000 barrel decline in gasoline stockpiles.
Gasoline supplies have dropped for the last six weeks straight, and EIA says they remain well below normal for this time of year.
Refineries operated at 90.5 percent capacity, less than the 92 percent capacity predicted by analysts.
Oil prices, which have jumped 30 percent so far this year, have rebounded from under $70 a barrel on Aug. 23 as concerns over a slowing economy faded, and attention turned to tight stockpiles and projected strong demand for crude over the next few years.
"The combination of robust long-term demand growth and lagging non-OPEC supply suggests that strong support for oil prices is set to remain a feature of the markets beyond 2010," Deutsche Bank chief energy economist Adam Sieminski wrote in a research note Tuesday after reviewing supply and demand projections from EIA, the International Energy Agency and OPEC.
The tight supply and demand picture is the main reason cited for oil's price surge since 2002, when it traded at just $20 a barrel.
High demand in the United States, as well as developing nations like China, India and Brazil, has not been met with a similar increase in oil supplies.
That means the difference in what the world could currently produce and what it consumes has narrowed, which magnifies the effect of any supply disruption - such as a hurricane in the Gulf of Mexico or even a possible war with Iran - as there is less spare capacity elsewhere to pick up the slack.
It has also attracted lots of money from investors betting on crude prices, which one recent study said is adding at least $10 a barrel to the price.
OPEC agreed to raise production by 500,000 barrels Tuesday, but the move did little to convince traders that the world will be adequately supplied with crude.
Despite setting a record high price, oil is still below the approximately $90 a barrel it would have been in the early 1980s, when adjusted for inflation. 
