Oil jumps 14% on surprise supply drop

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NEW YORK (CNNMoney.com) -- Oil prices rose more than 14% Thursday after the government reported that the nation's supplies of crude fell last week for the first time in two months.

Light, sweet crude for March delivery rose $4.86, or 14% to settle at $39.48 a barrel. That marks the biggest one-day jump since Dec. 31 when oil rallied $5.57 a barrel or 14.27%.

The April contract, which becomes the front-month contract when March expires Friday, rose $2.24, or 6%, to $39.64 a barrel.

Crude prices often spike in sessions leading up to the expiration of a contract, as traders not wishing to take delivery of physical oil roll their investments over into the next contract.

In its weekly inventory report, the Energy Information Administration said the nation's supplies of crude oil fell 200,000 barrels in the week ended Feb. 13. It was the first decline since the week ended Dec. 19, when oil inventories shrank by 3.1 million barrels.

Analysts were expecting oil supplies to have grown by 3.5 million barrels, according to a survey by research firm Platts.

The decline in crude stocks comes amid an uptick in refinery utilization and a drop in oil imports.

Refineries consumed an average of 14.1 million barrels a day during the week, up 16,000 a day from the prior week. Oil imports fell by an average 859,000 barrels a day from the previous week.

The decline in imports could reflect recent production cuts by members of the Organization of the Petroleum Exporting Countries, according to Tom Pawlicki, an energy analyst at MF Global in Chicago.

OPEC, which pumps more than a third of the world's oil, has been drastically scaling back production since September in an effort to combat rapidly falling prices.

The cartel has pledged to slash output by 4.2 million barrels a day at recent meetings, but inventories have remained at historically high levels as demand for oil and gasoline remains weak.

So far this year, oil is down nearly 25% and has tumbled roughly $110 a barrel from last summer's peak as the world's once-robust consumption of oil dwindles amid the weak economy.

Pawlicki warned that oil import data tends to be volatile and one week does not make a trend. But he noted that Thursday's report showed the lowest level of imports since September, when oil tankers were blocked by Gulf Coast hurricanes.

"I think the market is rallying because it really believes OPEC is showing itself in the U.S.," he said.

Supplies of gasoline, meanwhile, rose 1.1 million barrels as refinery activity picked up. Analysts were expecting gas supplies to have grown 1 million barrels last week.

Demand for gas was up 0.8% versus year ago levels, and total consumption of all crude-based products was down only 0.1%, the data showed.

Peter Beutel, an energy analyst at Cameron Hanover, said energy demand began to weaken roughly one year ago, and "we're starting to compare weak demand numbers to weak demand numbers."

The numbers are remarkable, however, because retail gas prices were considerably higher one year ago, yet demand is essentially unchanged. That suggests that demand, while still weak, "is not getting worse," Beutel said.

Distillate supplies, used to make heating oil and diesel, declined 800,000 barrels last week, versus an expected decline of a 1.5 million barrels.

The report is normally released on Wednesdays, but was delayed due to the Presidents Day holiday Monday.