US oil prices topped $94 a barrel on Wednesday for the first time in over a year, threatening to push up prices at the pump and inflation across the economy.
The latest gains came after federal data showed crude inventories fell by more than expected last week. Stockpiles at the closely watched Cushing, Oklahoma, storage hub plunged to nine-year lows.
"There's not a lot of oil there and that's causing some nervousness," said Tom Kloza, global head of energy analysis at Oil Price Information Service.
US crude prices jumped as much as 4% to $94.04 a barrel on Wednesday — the highest intraday price since August 30, 2022 — before settling at $93.68 a barrel, up 3.6% on the day.
The surge in oil prices could threaten the ongoing drop in gas prices.
The national average for regular gas dropped to $3.83 a gallon on Wednesday, according to AAA. That's five cents below the 2023 high set earlier this month.
The rally comes after a number of Wall Street banks ramped up their oil price forecasts in light of the aggressive supply cuts imposed by Saudi Arabia and Russia.
Bank of America now expects Brent oil to average $91 a barrel for the second half of this year, up from $81 a barrel previously. Goldman Sachs recently warned oil will average $100 a barrel this time next year.
Analysts say bullish bets by hedge funds and other market speculators have helped fuel the latest rally.
"They are gunning for $100 and at this rate they'll get there. It has a self-fulfilling element to it," said Robert Yawger, vice director of energy futures at Mizuho Securities. "The sky is the limit."
But Yawger said the oil price rally may be getting overdone. He also said the latest data from the Energy Information Administration was "highly questionable" because it showed inventories dropped even as imports increased, exports fell and less oil went through refineries.
"It doesn't add up. If you're an accountant, you're going to have a nervous breakdown," Yawger said.
Kloza expressed cautious optimism that gas prices are still going lower, as typically happens after the summer ends.
"We are probably getting in front of our skis a little bit," Kloza said of energy prices. "I still think we've seen the highs for gas prices, except perhaps for the Western states."