Crude oil futures prices settled higher Wednesday after an industry report showed a bigger-than-expected drop in U.S. gasoline inventories.

Traders said carry-over strength from gasoline helped crude rise, even as the Energy Information Administration report was bearish for crude. The EIA reported a rise of 4.2 million barrels against expectations for a modest decline in the week ended Aug. 12. Crude was propped up too by strong buying interest ahead of the expiration of the September crude oil options contract on the New York Mercantile Exchange.

"The build in crude is more bearish than the market is indicating," said Zachary Oxman, managing director at TrendMax Futures.

Light, sweet crude oil for September delivery settled up 93 cents at $87.58 a barrel. ICE Brent crude for October delivery settled $1.47 higher at $110.60 a barrel.

Crude futures traded to a high of $89 a barrel, the most since Aug. 4, but retreated from the high as U.S. equities turned lower. With crude failing to make a significant push toward $90 a barrel, some traders expect a move back toward $85 a barrel.

Even within the EIA data, which was supportive for gasoline prices, major concerns were evident that may set a weak base for a further rally. EIA said gasoline inventories fell 3.51 million barrels in the week, to the lowest level since May 20. The drop was more than the analysts' forecasts of a 1.2-million-barrel decline. But gasoline demand was 2.8% below a year ago and the lowest for the week in 10 years, at 9.195 million barrels a day, EIA data show.

Traders said the export market remains the major focus for U.S. refiners, as domestic demand for petroleum products continues to lag behind.

Within the reported rise in crude-oil inventories, stocks at Cushing, Okla., the delivery point for the Nymex crude oil futures contract, fell for a third straight week and now stand at 9% below a year ago, the biggest gap in 17 months. Cushing inventories stand at the lowest level since Nov. 19 as refiners with access to stockpiles at the relatively isolated hub responded to strong refining margins.

EIA reported distillates stocks [diesel/heating oil] rose 2.449 million barrels in the week, well above the expected 500,000 barrel rise. Stocks stand at the highest level since March 4, while demand lags the year-ago level by 3.3%.

"The bright spot" in the data was that four-week total demand was unchanged from a year ago at 19.4 million barrels a day, said Michael Wittner, analyst at Societe Generale. Year-to-date demand is down 0.6% at below 19.1 million barrels a day, EIA data show.

September reformulated gasoline blendstock futures settled 1.65 cents higher at $2.8703 a gallon. September heating oil settled 2.9 cents higher at $2.9616 a gallon, the most since Aug. 3.