Oil prices rise as supplies drop

Oil prices gained Wednesday as a government report showed that U.S. crude inventories unexpectedly dropped last week.

Crude stockpiles decreased 7.2 million barrels to 391.3 million in the week ending May 16, according to the Energy Information Administration (EIA). Markets expected the crude inventories to rise 250,000 barrels.

Supplies at Cushing, Oklahoma, the delivery point for WTI, fell by 225,000 barrels to 23.2 million, the least since December 2008.

U.S. crude production increased 6,000 barrels a day to 8.43 million last week, the most since October 1986, according to the EIA.

The economic calendar is light in the day. Mortgage applications increased 0.9 percent from one week earlier, according to data from the Mortgage Bankers Association's weekly survey for the week ending May 16.

New York Fed President William Dudley said Wednesday in a prepared speech that the economic recovery has been variable across the New York region since November.

Light, sweet crude for July delivery moved up 1.74 dollars to settle at 104.07 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude for July delivery gained 86 cents to close at 110.55 dollars a barrel.