Oil falls below $77 as inventories grow

NEW YORK -- Oil fell Wednesday after the government said crude supplies grew last week and the stock market reacted uncertainly to mixed earnings reports.

Gasoline pump prices lost a fraction of a cent at a national average of $2.718 for a gallon of unleaded regular. That's half a cent higher than a week ago and 26 cents above year-ago levels.

Benchmark crude fell 41 cents to $77.17 a barrel on the New York Mercantile Exchange. The contract rose 68 cents to settle at $77.58 on Tuesday.

Crude prices dropped from above $78 a barrel after the Energy Department's Energy Information Administration said in its weekly report that U.S. crude inventories rose by 400,000 barrels last week. That surprised analysts, who predicted a decline of 1.6 million barrels.

Stocks fluctuated between gains and losses after some major earnings reports. Apple and Coca-Cola beat analysts' expectations, while Yahoo disappointed. The Dow Jones Industrial Average was up about 10 points in afternoon trading. The NASDAQ and the S&P 500 were lower.

Oil traders are watching stocks and corporate earnings for signs of overall investor sentiment. Commerzbank said in a note to investors that "the events on financial markets, especially on the U.S. equity market, and the macro data will determine what happens on the oil market in the near term."

A tropical storm brewing in the Caribbean could affect oil and gas prices, if it moves into the Gulf of Mexico and disrupts production. Forecasters think the storm could hit south Florida by the weekend.

China's thirst for oil continues unabated. Platts, the energy information arm of McGraw-Hill, estimates China's oil demand in June was a record 8.98 million barrels per day. That's up 10 percent from a year ago. Earlier this week the International Energy Agency said China surpassed the U.S. as the world's biggest energy consumer in 2009.

In other Nymex trading, heating oil fell 2.06 cents to $2.0041 a gallon, gasoline lost 0.11 cent to $2.0775 a gallon and natural gas gave up 8.6 cents at $4.504 per 1,000 cubic feet.

Brent crude fell 27 cents to $75.95 a barrel on the ICE futures exchange.