Oil prices fell slightly to near $68 a barrel on Thursday in Asia amid mixed signals about crude demand from a weekly US inventory report.

Benchmark crude for August delivery fell 31 cents to $68.36 a barrel by midmorning Singapore time in electronic trading on the New York Mercantile Exchange. On Wednesday, it lost 57 cents to settle at $68.67.

Crude prices have fallen from an eight-month high near $73 earlier this month on investor doubts that demand in a weak US economy may not justify the stock and commodity rally since March.

The Energy Department's Energy Information Administration reported yesterday that US oil supplies dropped more than expected last week, falling 3.8 million barrels, or 1.1 percent.

However, gasoline in storage swelled 3.9 million barrels, which was more than expected, to 208.9 million barrels.

The US central bank also struck a cautious tone in comments on Wednesday.

The Federal Reserve said the economy doesn't appear to be sliding as quickly as it had been and consumer spending has shown signs of stabilising. However, job losses, shrinking wealth and tight credit will likely keep economic activity weak for some time.