Oil drops as Fed euphoria fades; gas below $3.50

By early afternoon, benchmark oil for October delivery was down $1.14, or 1.1 percent, to $106.13 a barrel on the New York Mercantile Exchange.

A day earlier, oil rose 2.5 percent after the Fed unexpectedly maintained its stimulus for the U.S. economy and the Energy Department reported a bigger than expected drop in supplies of crude oil and gasoline.

Most U.S. drivers are seeing lower prices at the gas pump. The nationwide average for a gallon of gasoline dropped below $3.50 for the first time since July 9. At $3.49 a gallon, the average is down 6 cents from a week ago. However, Californians aren't sharing in the relief. They're paying about 7 cents more on average than a week ago, due to unplanned maintenance at some refineries.

In other markets, Brent crude, the benchmark for international crudes used by many U.S. refineries, was down $1.55, or 1.4 percent, to $109.05 a barrel on the ICE Futures exchange in London.

Energy futures trading in New York showed:

— Wholesale gasoline dropped 5 cents to $2.69 per gallon.

— Natural gas fell 1 cent to $3.70 per 1,000 cubic feet.

— Heating oil slipped 3 cents to $3.01 per gallon.