Benchmark crude drops 93 cents to US$104.37/barrel; Brent down 74 cents to US$107.44/barrel; wholesale gasoline falls 4 cents to US$2.87/gallon; natural gas falls 7 cents to US$3.25/mcf

Cindy Allen

NEW YORK , August 7, 2013 (Associated Press) – Oil falls as Fed hangs over market; gov't reports smaller than expected supply drop

The price of oil fell Wednesday as the prospect of the Federal Reserve pulling back on stimulus measures hung over the market.

Another factor: the government reported a smaller than expected decline in oil supplies and a rise in gasoline inventories.

Benchmark crude for September delivery dropped 93 cents to close at $104.37 a barrel on the New York Mercantile Exchange. Oil has fallen $2.57 so far this week.

This past week, a number of Federal Reserve officials have indicated that the central bank may be close to reducing a bond-buying program that has kept long-term interest rates low. Those low rates have helped boost investment in riskier assets like stocks and oil.

The U.S. government's Energy Information Agency said Wednesday that crude oil supplies fell 1.3 million barrels last week. Analysts were expecting a drop of 2 million barrels, according to Platts, the energy information arm of McGraw-Hill. In addition, gasoline supplies rose by 100,000 barrels, while analysts had forecast a 1 million barrel decline.

At the pump, the average price of a gallon of gasoline fell 1 cent to $3.60. That's down 3 cents over the past week.

Brent crude, traded on the ICE Futures exchange in London, was down 74 cents at $107.44 a barrel.

In other energy futures trading on Nymex:

— Heating oil fell 4 cents to $2.96 a gallon.

— Natural gas fell 7 cents to $3.25 per 1,000 cubic feet.

— Wholesale gasoline fell 4 cents to $2.87 a gallon.

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Pamela Sampson in Bangkok contributed to this article.

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