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Oil prices fell Thursday as the U.S. dollar strengthened and after a U.S. government report showed a build in crude supplies.

'The recovery in the U.S. dollar weighs on oil prices,' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

The U.S. Energy Department's Energy Information Administration reported Wednesday that crude stockpiles grew 2.4 million barrels last week — more than double what analysts expected, and the first crude inventory gain in three weeks.

Despite the gain, prices continued to be supported by concerns about supplies worldwide. About 170,000 barrels a day of Nigerian production remained shut-in following a pipeline attack earlier this week. BP PLC is also considering shutting down its 700,000-barrel-a-day Forties pipeline system if a strike continues at a U.K. refinery.

Light, sweet crude for June delivery fell 27 cents to $118.03 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract settled 23 cents higher at $118.30 a barrel Wednesday.

The EIA also reported that gasoline stocks fell 3.2 million barrels last week, about a million barrels more than expected. Gasoline supplies have been falling lately, raising concerns about stockpile levels as the Northern Hemisphere summer driving season approaches.

Those concerns about motor fuel supply are exacerbated by the possible shut-in of BP's Forties pipeline system. Both the North Sea and Nigeria produce oil that is low in sulfur and other impurities, which makes it ideal for gasoline production. Prospects that gasoline output may fall further just ahead of peak demand have led some analysts to believe that gasoline prices will drive the oil spectrum higher.

But Shum noted also that gasoline inventories remain above the five-year average for this time of the year, despite the decline.

'Even though the gasoline inventory dropped sharply, the inventory at this time of the year in the U.S. is at the top end of the range despite several weeks of declines,' he said. 'The overall level of gasoline stocks is at a healthy level and so there should not be any concern about tightness in supply.'

Stockpiles of distillates, which include heating oil and diesel, fell 1.4 million barrels, more than four times the expected level.

Heating oil futures fell 0.5 cent to $3.32 a gallon while gasoline prices dropped 1 cent to $3.0407 a gallon. Natural gas futures added 0.4 cent to $10.785 per 1,000 cubic feet.

Brent crude futures fell 22 cents to $116.24 a barrel on the ICE Futures exchange in London.