Oil prices rallied on Wednesday as a slump in U.S. crude oil stockpiles to their lowest level in nearly three years rekindled worries of a winter supply crunch.

U.S. crude settled up $1.16 at $91.24 a barrel. London Brent rose $1.36 to $91.48.

The U.S. Energy Information Administration reported that crude stockpiles in the world's largest energy consumer dropped 7.6 million barrels last week to 296.9 million, the lowest since February 2005.

Experts attributed the slump in stockpiles to a slowdown in imports after fog interrupted shipping along the U.S. Gulf Coast and a deadly ice storm in the U.S. heartland temporarily shut down major crude oil pipelines.

Of the unexpectedly large drop in crude oil stocks this week, 5.8 million barrels came out of the Gulf Coast. That means the majority can be attributed to fog in the Houston Ship Channel last week, said Tim Evans, energy analyst at CitiGroup Futures Research in New York.

U.S. crude stocks have fallen about 16 percent since late June, and are about 9 percent below a year ago, pressured in part by tight-fisted OPEC output policy, according to the EIA.

Inventory levels have tightened just as a cold snap in the U.S. Northeast has bolstered fuel demand in the region, home to about 80 percent of the nation's heating oil consumption.

Crude prices rose close to $100 a barrel last month as oil traders fretted that inventories were becoming dangerously low heading into the peak of the winter.

But prices have retreated from record territory amid nagging worries over the health of the U.S. economy, dogged by a severe credit crunch. A deep economic slowdown could cut into energy demand.

A top Federal Reserve official said on Wednesday the U.S. economy would be very weak for several more months, but added inflation is a worry and could mean tough monetary policy decisions next year.

Morgan Stanley became the latest bank to reveal the impact of the credit market crisis, reporting a big fourth-quarter loss after writing off $9.4 billion of its exposure to high-risk U.S. mortgages and related securities.

The company also sold a $5 billion stake to a Chinese state investment fund to bolster its capital.

Crude oil OPEC U.S. Fall