Oil prices fell to near $104 a barrel Wednesday March 30, 2011 after a report showed U.S. crude supplies rose more than expected last week, suggesting rising fuel costs may be crimping demand.

By early afternoon in Europe, benchmark crude for May delivery was down 47 cents to $104.32 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 81 cents to settle at $104.79 on Tuesday March 29, 2011.

In London, Brent crude was down 38 cents at $114.78 a barrel on the ICE futures exchange.

Crude has jumped about 24 percent since Feb. 15, around when the protests against Libya's Moammar Gadhafi began, and analysts say higher prices for gasoline and heating oil could eventually hurt consumer demand.

The American Petroleum Institute said late Tuesday that crude inventories rose 5.7 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 2.2 million barrels. Inventories of gasoline fell 1.9 million barrels and distillates fell 112,000 barrels, the API said.

The U.S. Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

"Consumer confidence is starting to erode and high oil prices probably have something to do with it," said Olivier Jakob of Petromatrix in Switzerland.

Violent political protests throughout the oil-rich Middle East and North Africa this year are also keeping markets on edge. Syrian President Bashar Assad fired his Cabinet on Tuesday and promised to end 48-year-old emergency laws. Syrian security forces have killed more than 60 anti-government demonstrators since March 18, according to Human Rights Watch.

"The sudden resignation of the Syrian government was seen by many traders as a sign that the unrest continues to spread and take root in the Middle East," Cameron Hanover said in a report.

In Libya, rebels retreated from the key oil port of Ras Lanouf after they came under heavy shelling from ground forces loyal to Gadhafi.

On Tuesday, oil prices temporarily fell as rebels appeared to be making gains on Gadhafi's positions and vowed to boost oil exports soon. Qatar also promised at a conference in London to see how it could help Libyan oil sales and use the proceeds to help meet Libyan humanitarian needs.

"Investors seem to want to get a little more closure out of several ongoing situations in the Middle-East before they get comfortable enough staking out big positions," said Edward Meir of MF Global in New York. "This explains the sub-par trading volumes, but it will also contribute to the slow drift lower price wise."

In other Nymex trading for April contracts, heating oil fell 0.53 cent to $3.0362 a gallon and gasoline dropped 0.59 cent to $3.0399 a gallon. Natural gas rose 2.9 cents to $4.292 per 1,000 cubic feet.