Oil hit a new record high above $78 on Wednesday after a larger-than-expected drop in crude inventories in the United States.
U.S. crude rose to an intraday high of $78.77 a barrel, surpassing the previous peak of $78.40 reached in July 2006. The September contract was trading up 19 cents at $78.40 by 11:20 a.m. ET.
London Brent, less directly influenced by U.S. oil inventory movements, fell 75 cents to $76.30.
Crude oil stocks in the world's largest energy consumer tumbled 6.5 million barrels, the Energy Information Administration said, surpassing analysts' expectations for a 700,000 barrel decline.
These numbers are enough to keep the (crude) rally alive, said Jim Ritterbusch, president of Ritterbusch and Associates.
Crude oil stocks were lower in every region of the United States as refiners ramped up production of gasoline and other petroleum products.
U.S. refinery utilization rose 1.9 percentage point to 93.6 percent of capacity, the highest level in 11 months.
The crude draw is quite impressive and crude will drive the market as it has in recent days, and products will ride along, said Tom Knight, trader with Truman Arnold.
Gasoline supplies rose 600,000 barrels for the week to July 27, while distillates jumped 2.8 million barrels.
Oil has surged more than $8 over the past month, despite a bout of risk aversion that has hit equity markets amid escalating sub-prime lending woes in the United States.
Analysts attribute the bullish sentiment to an influx of fund money, geopolitical tensions, and OPEC's reluctance to raise production.
OPEC, which meets again on September 11 to discuss pre-winter policy, has said it sees no need to unwind the two production cuts it agreed in late 2006 as long as inventories are high.
OPEC, excluding Iraq and Angola, pumped more crude oil in July than in June, led by a rebound in supply from Nigeria after a spate of outages, a Reuters survey showed.
Ten OPEC members bound by output targets pumped 26.75 million barrels per day, up 150,000 bpd from June, according to the survey of oil firms, traders, OPEC officials and analysts.
(Additional reporting by Jonathan Leff in Singapore and Janet McBride in London)