Oil prices dropped Wednesday as minutes of the U.S. Federal Reserve's July policy meeting signaled a likely reduction of its massive asset purchase programs this year.

The minutes of the Federal Open Market Committee (FOMC), the policy-setting arm of the Fed, showed broad support for Chairman Ben Bernanke's tapering timeline. Members of the FOMC were" broadly comfortable" with the plan to start trimming down bond buying later this year if the economy improves.

In the meantime, U.S. jobs data of July got better. The unemployment rate edged down to 7.4 percent from 7.6 percent in June.

Central bankers and policy makers will meet in Jackson Hole, Wyoming, from Thursday to Saturday to discuss economic situation and monetary policy.

Energy Information Administration (EIA) said Wednesday crude supplies shrank 1.4 million barrels to 359.1 million barrels for the week ending Aug. 16, exceeding analysts' predicted drop of 1 million barrels.

Gasoline supplies went down 4 million barrels to 218.4 million barrels. The EIA report also showed that U.S. refineries operated at 91 percent of the total capacity.

On the U.S. economic front, the existing-home sales rose strongly in July, increasing 6.5 percent to a seasonally adjusted annual rate of 5.39 million from a downwardly revised 5.06 million in June, according to the National Association of Realtors. The data beat market expectations.

Light, sweet crude for October delivery lost 1.26 dollars to settle at 103.85 dollars a barrel on the New York Mercantile Exchange.

Brent for October delivery went down 34 cents to close at 109. 81 dollars a barrel.