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Oil hits a 17-month high

By Annalyn Censky, staff reporter

NEW YORK (CNNMoney.com) -- Oil prices posted a 17-month high, nearing $84 a barrel Wednesday after President Obama announced his plans to open new areas to offshore drilling.

What prices are doing: Crude oil prices for May delivery rose $1.39 to $83.76 a barrel. Oil settlement is its highest since Oct. 9, 2008 when it settled at $86.59.

Click the chart for current commodities prices.

What's moving the market: In a speech Wednesday morning, President Obama announced he will open new areas for drilling along the Atlantic coastline, the Gulf of Mexico and the north coast of Alaska.

The plan reverses 20 years of regulations that banned drilling in most offshore areas outside the Gulf of Mexico.

Before Obama's speech, the U.S. Department of Energy reported weekly crude inventories rose by 2.9 million barrels and gasoline supplies increased by 300,000 barrels. Analysts polled by Platts were expecting crude supplies to rise by about 2.65 million barrels and gasoline inventories to drop by 2 million barrels.

The higher-than-expected supply numbers temporarily drove down oil prices in mid-day trading.

What analysts are saying: Oil gains earlier this week were primarily due to increased demand from India, China and the Middle East, as well as a seasonal boost in U.S. demand, as motorists start driving more, said Chris Lafakis, an economist with Moody's Economy.com.

Although the Department of Energy's lower-than-expected demand numbers put a damper on bullish oil prices earlier this morning, once the news of Obama's speech made headlines, oil prices went right back up, said Dan Flynn, an energy trader with PFG Best Research.

Looking ahead: Since the offshore drilling plans Obama announced Wednesday will not inject more oil into the supply chain immediately, don't expect for the news to be a major market mover after the initial euphoria wears off, Flynn said.

In the meantime, investors will be looking ahead to the government's latest unemployment numbers on Friday. To top of page

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