Oil prices jumped sharply Wednesday as Federal Reserve Chairman Ben Bernanke told Congress that the economic recovery remains on track.
Prices also got a boost after the government reported that stocks of crude fell more than expected last week. There are also concerns about what effect the six-month moratorium on deepwater drilling in the Gulf could have on domestic energy production.
Benchmark crude for July delivery rose $2.39 to settle at $74.38 a barrel on the New York Mercantile Exchange.
Bernanke did not rule out the country falling back into recession, but he predicted that the economy will continue to recover at a moderate pace. He also said the European debt crisis is likely to have only a modest impact on the U.S. recovery.
"Bernanke's comments created a certain exuberance across the market," said Mike Lynch, president of Strategic Energy & Economic Research.
Oil also got a boost from the Energy Information Administration report that showed crude supplies fell more than expected last week. The draw was particularly steep in the Gulf Coast region and larger than normal for this time of year, oil analyst and trader Stephen Schork said.
The drilling moratorium also weighed on investors worried that it will hurt domestic production down the road, he said.
The Organization of Petroleum Exporting Countries, which supplies 35 percent of the world's oil, left its monthly outlook for oil demand essentially unchanged on Wednesday.
OPEC sees world demand at 85.37 million barrels per day, or 1 percent more than in 2009. OPEC said there are signs that demand is picking up, but the European debt crisis, an oversupply of crude and the potential cooling of China's economy could slow demand.
Pump prices dropped 0.5 cent overnight to a national average of $2.713 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service.
Prices are now 1 cent lower than a week ago and down 19.5 cents from a month ago. They area 9.1 cents higher than year-ago levels.
In other Nymex trading in July energy contracts, heating oil rose 4.43 cents to settle at $2.0096 a gallon, and gasoline gained 5.06 cents to settle at $2.0397 a gallon. Natural gas fell 13.1 cents to settle at $4.677 per 1,000 cubic feet.
Brent crude rose $1.97 to settle at $74.27 a barrel on the ICE futures exchange.