Oil prices were flat on Wednesday despite an Energy Department report showing a drop in crude and gasoline supplies.

Benchmark crude for October delivery closed where it began at $US68.05 a barrel on the New York Mercantile Exchange. The contract lost $US1.91 on Tuesday.

Gasoline inventories fell by three million barrels to 205.1 million barrels, the Energy Department said, a steeper decline than analysts had expected. Gasoline supplies have increased by two per cent since May, while a typical driving season at this point would show a draw of around of 4.6 per cent.

Crude oil had been trading higher overnight after the American Petroleum Institute said late Tuesday that US inventories fell by 3.2 million barrels last week. Refiners voluntarily report the API numbers, while the Energy Department reports mandatory supply figures.

But crude prices slipped just ahead of the Energy Department report, as new figures from the Labor Department showed companies earlier this year slashed spending on everything, including energy. The morning crude inventories report boosted prices above $68, but the rally couldn't hold.

In other Nymex trading, gasoline for October delivery gained 2.64 cents to settle at $US1.8086 a gallon and heating oil lost less than a cent to settle at $US1.7505 a gallon. Natural gas fell 10.6 cents to settle at $US2.715 per 1,000 cubic feet.

Gold prices have surged, breaking out of a narrow trading range that has been a constraint for months. Gold for December delivery jumped $US22, or 2.3 per cent, to $US978.50 an ounce on the New York Mercantile Exchange - its highest close since June 4 and the biggest one-day jump since March 19 when the metal jumped more than $US69.