NEW YORK - Oil prices fell slightly on Wednesday as concerns about a rebound in the economy offset a drop in U.S. oil and fuel inventories.

Data showed construction of new homes in the United States fell sharply last month, indicating potential weakness in the economy's recovery, while consumer prices rose slightly more than expected.

Optimism that an economic turnaround could push up demand has supported prices this year, with energy traders looking to macro-economic data for signs of a rebound.

"Investors are losing hope in the prospects for a recovery in U.S. oil demand," said Credit Suisse Global Energy in a research note.

The financial crisis has battered fuel demand in developed economies such as the United States, knocking crude from record highs near $150 a barrel in July 2008 to below $33 a barrel in December of last year.

U.S. crude traded down 13 cents to $79.01 a barrel at 1:32 p.m. EST (1832 GMT), while London Brent crude gave up 1 cent to trade at $78.96 a barrel.

Data from the U.S. Energy Information Administration showed total refined product demand in the world's top consumer, down 4.1 percent over the past four weeks against last year.

The data also showed U.S. crude oil inventories fell by 900,000 barrels last week, exceeding forecasts for a 300,000 barrel drop. Gasoline and distillate stocks dropped by 1.7 million and 300,000 barrels, respectively.

The draws came after Tropical Storm Ida forced oil and natural gas companies to shutter production facilities in the Gulf of Mexico last week.

Traders were also watching the direction of the U.S. dollar. The greenback has fallen steadily for most of this year and hit a 15-month low this week, helping drive commodities higher as investors have sought hard assets to hedge against the depreciating currency.