SINGAPORE, June 06 (AP/UNB) - Oil prices rose to near $85 a barrel Wednesday in Asia after a report showed U.S. crude supplies fell more than expected, suggesting demand may be improving.

Benchmark oil for July delivery was up 57 cents to $84.86 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 31 cents to settle at $84.29 in New York on Tuesday.

In London, Brent crude for July delivery was up 46 cents at $99.30 per barrel on the ICE Futures exchange.

The American Petroleum Institute said late Tuesday that crude inventories fell 1.8 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 1 million barrels.

Inventories of gasoline rose 1.4 million barrels last week while distillates increased 1.8 million barrels, the API said.

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

Crude has sunk from $106 last month amid signs of weakening economic growth and oil demand in Europe, the U.S. and China.

A dismal U.S. jobs report last week has investors worried the world's biggest economy is faltering just as Europe's debt crisis threatens to send the continent into recession.

J.P. Morgan recently cut its U.S. economic growth forecast for the 2012 to 2.2 percent and expects crude demand to be flat the rest of the year from a year earlier.

"With the U.S. economic forecast now moving lower, flags are being raised not only in Europe and Asia, but also in the U.S.," J.P. Morgan said in a report.

Traders will closely watch a European Central Bank policy meeting later Wednesday and congressional testimony from U.S. Federal Reserve Chairman Ben Bernanke on Thursday.

In other energy trading, heating oil was up 0.5 cent at $2.64 per gallon while gasoline futures gained 1.1 cents at $2.70 per gallon. Natural gas fell 0.4 cent at $2.44 per 1,000 cubic feet.