U.S. crude oil prices surged on Wednesday as a majority of oil production in the Gulf of Mexico remained shut because of the Tropical Storm Lee.

The U.S. government reported that more than 60 percent of oil production in the Gulf remained shut following Tropical Storm Lee, which started to impact the oil concentrated Gulf region in the past week and weakened Sunday. Government estimates have placed a loss of oil supply to the market at more than 4 million barrels since energy companies in the region began to close production on Sept. 1.

There were reports saying President Barack Obama would propose a 300 billion U.S. dollar package to boost jobs, which is calculated to help restore the market confidence in a better economy.

Positive news also came from Europe over the debt crisis. After Italy proposed a new austerity plan, Germany's top court decided to give its support to Berlin for participating in euro zone bailout packages, which eased concerns about European debt crisis.

And the dollar index, which tracks the greenback's performance against a basket of six currencies, fell about 0.6 percent as the euro got boosted by the European debt hopes. A weaker dollar was usually bullish to dollar-denominated oil.

Prices of light, sweet crude for October delivery jumped 3.32 dollars, or 3.86 percent, to settle at 89.34 dollars a barrel on the New York Mercantile Exchange.

In London, Brent crude for October delivery rose 2.91 dollars, or 2.58 percent, to close at 115.80 dollars a barrel.