NEW YORK (CNNMoney.com) -- Oil prices rose Wednesday as a tropical storm swirled in the Gulf of Mexico and the government said supplies of crude oil fell far more than expected.
U.S. light crude for September delivery jumped $1.05 to $73.43 a barrel on the New York Mercantile Exchange. Oil had traded up 93 cents just prior to the report's release.
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Traders nervously eyed Tropical Depression 5, which the National Weather Service said is currently 365 miles southeast of Brownsville, Texas.
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The storm is expected to strengthen to a named tropical storm and make landfall sometime in the next 24 hours, the agency said.
It issued flood warnings for Friday along the Texas Gulf Coast, home to about a third of the nation's refiners.
Shell said it has begun evacuating some employees from one operation in the Gulf, but so far other oil companies said they are monitoring the situation, Reuters reported.
In its latest inventory report, the Energy Information Administration said crude stocks dropped by 5.2 million barrels last week. Analysts were looking for a decline of 2.3 million barrels, according to Reuters.
Distillates, used to make heating oil and diesel fuel, rose by 200,000 barrels while gasoline supplies fell by 1.1 barrels. Analysts were looking for a 1.2 million barrel gain in distillates supplies and a 900,000 barrel decrease in gasoline stockpiles.
The report said refineries operated at 91.8 percent capacity, up slightly from last week and about as much as expected.
Gasoline demand was sluggish, growing at just 0.4 percent from the same time last year, EIA said. Gasoline demand usually grows at a rate of about 1.5 percent.
Oil prices hit a record trading high of $78.77 on Aug. 1, but have fallen in the wake of defaults in the subprime mortgage sector.
Some fear the subprime mess could spread to the broader economy, hurting economic growth and reducing demand for crude.
Oil prices have also fallen as investment funds, stung by losses in subprime mortgages and declining stock prices overall, sell commodities to raise cash. Top of page
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