Oil prices fell slightly to near $79 a barrel on Wednesday in Asia despite an unexpected drop in US crude supplies which suggested demand may be picking up.

Benchmark crude for December delivery was down 20 cents to $79.40 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract gained $1.47 to settle at $79.60 on Tuesday.

US oil inventories dropped last week, the American Petroleum Institute said late yesterday. Crude stocks fell 3.3 million barrels while analysts had expected a rise of 1.3 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Information Administration is scheduled to release its supply data later on Wednesday.

Crude has fallen from its 2009 high of $82 a barrel last month on investor doubts about the strength of the US economy. Some analysts say the oil price could fall further if a monthly US unemployment report on Friday confirms the number of jobless continues to swell.

"We still feel that a decline toward the $75 area could be forthcoming as this week proceeds," Galena, Illinois-based Ritterbusch and Associates said in a report.

In other Nymex trading, heating oil fell 1.21 cents to $2.06 a gallon. Gasoline for December delivery dropped 0.99 cent to $1.99 a gallon. Natural gas for December delivery was steady at $4.92 per 1,000 cubic feet.