NEW YORK—Oil prices rebounded slightly Wednesday, hovering above $123 a barrel, after the government reported that U.S. gasoline supplies fell unexpectedly last week while crude stockpiles dropped less than expected.

Light, sweet crude for September delivery rose 83 cents to $123.02 a barrel in morning trading on the New York Mercantile Exchange. The contract had fallen below $121 a barrel earlier in the day.

The Energy Information Administration said U.S. gasoline supplies fell by 3.5 million barrels last week. Analysts surveyed by energy research firm Platts expected gas supplies to increase by 400,000 barrels.

The surprise drop in gas supplies suggests record oil prices haven’t curbed U.S. fuel demand to the extent that some energy market experts had anticipated after crude spiked above $147 a barrel earlier this month.

U.S. crude stockpiles also fell by 100,000 barrels last week, less than the 1.3 million barrels analysts had predicted. Inventories of distillates, which include heating oil and diesel, rose by 2.4 million barrels, more than the 1.8 million barrels expected.

Before Wednesday’s bounce, crude prices had dropped in seven of the last 10 sessions, and are down about 17 percent from their peak above $147 a barrel earlier this month. Prices remain about 60 percent higher than at this time last year.

The dollar was stronger Wednesday against the euro and the Japanese yen, contributing to lower oil prices. Investors buy commodities as a hedge against inflation and a weaker dollar but tend to sell when the American currency strengthens.

Lending some support to oil prices was Tuesday’s announcement from Royal Dutch Shell PLC that it may not be able to fulfill some oil export contracts after Nigerian militants sabotaged a pipeline in the Niger Delta.

In other Nymex trading, heating oil futures fell 1.13 cents to $3.4609 a gallon while gasoline prices gained 3.13 cents to $3.039 a gallon. Natural gas futures fell 5.3 cents at $9.073 per 1,000 cubic feet.

In London, September Brent crude was up 68 cents at $123.39 a barrel on the ICE Futures exchange.