Benchmark crude rose 74 cents to $87.67 per barrel in New York, while Brent crude added $1.79 to $112.33 in London.
Tropical Storm Lee battered oil platforms along the Gulf Coast earlier this month, forcing companies to evacuate workers and cutting daily production by as much as 900,000 barrels per day. Those platforms are back online, but the slowdown in production continues to hurt U.S. supplies.
The Energy Information Administration said the nation's oil inventories dropped by 7.3 million barrels last week, mostly from facilities along the Gulf Coast. Analysts surveyed by Platts, the energy information arm of McGraw Hill Cos., expected a decline of only 1 million barrels.
The drop in supplies shouldn't be taken as a sign that the economy needs more oil, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service: "The global market isn't really tightening."
The government report said that demand for gasoline and other petroleum products declined last week, when compared to the same time last year. Gasoline supplies grew more than expected, the EIA said, with supplies increasing by 3.3 million barrels last week.
Besides the supply report, analysts said investors also are buying oil ahead of the Federal Reserve meeting. The Fed could announce new measures to stimulate the economy Wednesday afternoon. Doing so could spark energy demand in the U.S. and boost oil prices.
At the pump, gasoline prices dropped by a penny to a national average of $3.57 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular peaked this year near $4 per gallon in May. But the decline since then has been uneven across the country. Gasoline is 50 cents per gallon cheaper in some Midwest states and the Southeast than it is in major cities on the east and west coasts.
In other energy trading, heating oil rose more than 3 and a half cents to $2.9954 per gallon, while gasoline futures increased 3 cents to $2.7319 per gallon. Natural gas fell 4 cents to $3.763 per 1,000 cubic feet.