Oil jumps nearly 6%

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NEW YORK (CNNMoney.com) -- Oil prices rose Wednesday after the government reported a surprising decrease in gasoline stockpiles, implying increased demand.

Crude for November delivery rose $3.90, or 5.85%, to settle at $70.61 a barrel.

"The decline in gasoline demand in last week's report significantly rebounded this week with a draw in gasoline inventories," said MF Global energy analysts John Kilduff, who said that the unexpected drop in stockpiles dominated investors' focus and sentiments.

Kilduff said prices were also boosted by growing tensions related to Iran, the second largest producer in OPEC, ahead of Thursday's meeting between the Islamic republic and the United States, Britain, France, Russian, China and Germany.

"The revelation of the Iranian nuclear facility seems to be installing higher and higher floors for oil prices as the situation becomes clearer," Kilduff said. "If the situation deteriorates and the rhetoric around it becomes more bellicose, prices could reach between $80 and $100 a barrel later this year."

Though unemployment data expected later this week usually would have a "great deal of influence" on oil prices, Kilduff said the Iranian situation will countervail the economic figures.

Inventory report. The Energy Information Administration reported an increase in crude stocks of 2.8 million barrels in the week ended Sept. 25. Analysts were expecting a rise of 2.1 million barrels, according to a consensus estimate collected by energy information provider Platts.

Gasoline stockpiles fell by 1.6 million barrels, according to the EIA report, surprising analysts who had forecasted an increase of 1.2 million barrels.

The government report also showed that distillates, used to make heating oil and diesel, rose by a modest 300,000 barrels, under analysts' expectations of a 900,000-barrel increase.

Gasoline prices. The national average price for a gallon of regular unleaded gas decreased to $2.479 Wednesday, down 0.8 cent from the previous day's $2.487, according to motorist group AAA. It was the ninth consecutive day the price of gas has declined.