Crude oil futures fell after a U.S. government report showed an unexpected increase in inventories. Supplies climbed 360,000 barrels to 353.5 million in the week ended July 16, the Energy Department said today in a weekly report. Inventories were forecast to drop by 1.2 million barrels, according to the median of 17 analyst estimates in a Bloomberg News survey. Crude oil for September delivery fell 60 cents, or 0.8 percent, to $76.98 a barrel at 10:35 a.m. on the New York Mercantile Exchange. Oil traded at $77.89 a barrel before the release of the report at 10:30 a.m. in Washington. Prices also dropped on concern that the recovery of the U.S. economy may falter, curbing fuel demand in the biggest energy-consuming nation. U.S. builders cut back on housing starts on a slump in home sales that followed the expiration of a government tax incentive, a report from the Commerce Department showed yesterday. Work began on 549,000 houses at an annual rate last month, down 5 percent from May. Payrolls decreased in 27 U.S. states last month, the Labor Department said yesterday. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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