Meanwhile, the U.S. government said crude inventories fell slightly last week but remain 8.4 percent above year-ago levels. Gasoline supplies also rose.

There will be further big price swings in oil this month as the market reacts to each piece of major economic news, says Jim Ritterbusch, of Ritterbusch & Associates. In a daily newsletter, he said oil could jump over the next two days on any positive surprises from the European Central Bank's policy meeting Thursday or the latest U.S. unemployment report on Friday.

In other energy futures trading:

â¿¿ Natural gas fell 13.6 cents, or 3.8 percent, to $3.395 per 1,000 cubic feet, a day after hitting a high for the year.

â¿¿ Heating oil dropped 5.9 cents to $3.066 per gallon.

â¿¿ Wholesale gasoline dropped 7 cents, or 2.5 percent, to $2.80 per gallon.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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