Oil prices have once again moved higher today, spurred on by government data that showed larger than expected declines in inventories last week. Prices moved up as high as $82.51, but have since pulled back slightly to $81.95, up $0.44 on the day.

The U.S. Energy Information Administration reported earlier today that last week U.S. crude stocks fell by 3.8 million barrels, which was was almost double what analysts had been expecting to see. Prices are now up around 33% since the start of the year, and after trying to guess for so long if we would see $80 oil, we are now left wondering how quickly we are going to be seeing prices head up to $85 a barrel. My guess is that we will be there within a week.

OPEC members have to be loving the recent price jump. The oil cartel did save a little face last week when it decided to raise its output by 500,000 barrels a day, but many read through that decision as nothing more than empty words promising too little, too late. It is true that even before OPEC decided to lift its quota that the group was already producing above its prior quota levels, so many were left wondering what impact last week's decision would have on the market. Typically you would expect such a decision to result in lower prices, but all it accomplished was pushing prices even higher.

Oil futures have moved higher in today's trading following today's weekly inventory report from the U.S. Energy Information Administration that showed inventories shrank much more than analysts had been expecting. After trading up as high as $77.43, prices have cooled off a bit, but are still trading up 15 cents on the day to $75.88.

Analysts had been looking to see a drop in oil inventories of around 2.2 million barrels for the week ended August 31, but the actual figures showed that inventories fell by almost twice that amount, dropping 3.9 million barrels.

After falling sharply during the first three months in August, prices have been strong over the last couple of weeks and are once again on their way to testing its record high of $78.77 set on the first of last month.

The oil market is definitely a volatile beast, and any such unexpected decline like the one that we see today is bound to bring the bulls out in full force. Last month's sell off was mainly due to the fact that traders were concerned that the subprime meltdown would start to impact economic growth, but now traders have started to look past this concern and focus once again on supplies.