In its weekly inventory report, the Energy Information Administration said gasoline supplies fell by 4.5 million barrels last week, twice the decline forecast by analysts surveyed by Dow Jones Newswires. The EIA data also showed that demand for gas rose by nearly 1 percent when compared to the same week last year. That reverses a pattern in which demand had been falling.

Falling gasoline inventories and rising demand suggest supplies are tightening as the peak summer driving season approaches. That could boost gas prices further, and keep oil prices elevated.

"There's just an incredible seasonal tug for gasoline to move higher in April," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J. "We'll see another record-breaking retail price (soon)."

May gasoline futures rose 13.44 cents to settle at a record $2.7736 a gallon on the New York Mercantile Exchange. Crude oil futures for May delivery followed gasoline higher, jumping $3.85 to settle at $104.83 a barrel on the Nymex.

Surging gas and oil futures prices are likely to contribute to the upward trend at the pump. Retail gas prices rose 0.1 cent overnight to a national average of $3.287 a gallon, matching Monday's record, according to AAA and the Oil Price Information Service. The Energy Department expects gas prices to peak near $3.50 a gallon this spring as suppliers stock up in advance of peak summer driving season, but many analysts believe prices could rise much higher than that.

It is possible that last week's jump in gasoline demand could be an aberration. Indeed, demand over the last four weeks remains off 0.5 percent compared to the same four-week period last year. Kloza called the weekly demand figure a "rogue" number, and said his conversations with gasoline supplies suggest demand is weaker than government data suggests. The trend won't become clearer until another set of figures is released, next week.

Gasoline supplies are falling in part because refinery activity is low. Refinery activity increased by only 0.2 percentage point last week to 82.4 percent of capacity.

Crude oil's rise to record levels in recent weeks has also helped send gas higher. Crude's jump Wednesday came as investors shrugged off EIA data showing oil inventories grew by 7.4 million barrels last week, more than three times the increase analysts had expected.

Although theoretically rising oil supplies could undermine crude prices, futures have been driven higher recently by weakness in the dollar and speculative buying by investors who believe rising demand overseas will keep sending crude skyward. The dollar supported oil prices Wednesday by falling after Federal Reserve Chairman Ben Bernanke told Congress the economy may be headed for a recession. Many investors see commodities such as oil as a hedge against inflation and a falling dollar.

In other Nymex trading Wednesday, May heating oil futures rose 7.13 cents to settle at $2.951 a gallon. Inventories of distillates, which include diesel and heating oil, fell by 1.6 million barrels last week, in line with analyst estimates.

May natural gas futures rose 10.8 cents to settle at $9.832 per 1,000 cubic feet.

In London, May Brent crude futures rose $3.58 to settle at $103.75 a barrel on the ICE Futures exchange.

Diesel prices rose 0.3 cent at the pump Wednesday to a national average of $4.025 a gallon. That's a bit more than a cent shy of a record set late last month.

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