NEW YORK (CNNMoney.com) -- Oil prices fell further Wednesday after the government's inventory report, the first since BP shut down half its giant Alaska oil field, said crude stocks were about what analysts expected.

Oil fell $1.16 to settle at $71.89 a barrel on the New York Mercantile Exchange. Crude was 35 cents lower just prior to the report's release Wednesday morning.

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In its weekly assessment of domestic petroleum supplies, the Energy Information Administration said crude stocks fell by 1.6 million barrels, in line with estimates that figured in a disruption from the BP shutdown.

Gasoline supplies fell a little more than expected, declining by 2.3 million barrels, while distillates, used to make heating and diesel fuel, rose by 800,000 barrels.

Analysts were looking for a 1.8 million barrel drop in gasoline supplies and an increase in distillates of 500,000 barrels.

"You're seeing a continued withdrawal of speculative froth out of the market," said Mike Fitzpatrick, an analyst at Fimat, noting BP's decision to keep half its Alaska field open and the apparent holding of a cease-fire between Israel and Hezbollah.

When asked how much further he expected prices to fall, Fitzpatrick replied, "not much."

BP shut in 200,000 barrels per day at its Prudhoe Bay operation last week, half the field's capacity and about 4 percent of total domestic production, after severe corrosion was found in sections of pipeline.

Analysts were closely watching crude stocks to gauge the impact of the BP shutdown, which was initially said to take the entire 400,000 barrel per day field offline.

Of particular concern was the West Coast, where most of Alaska's oil is sent.

But the EIA report only noted a small decline in West Coast crude supplies, which went from 53.8 million barrels two weeks ago to 51.9 million barrels last week. And gasoline supplies on the West Coast actually rose by 200,000 barrels.

Overall, EIA noted that crude and distillate supplies remain above average for this time of year, while gasoline stocks are slightly below average.

A report from OPEC Wednesday predicting a slowing growth rate for oil demand also helped push prices lower.

The cartel said worldwide demand for oil will grow by 1.3 million barrels per day in 2006 to average 84.5 million bpd. The 1.3 million bpd number is 80,000 bpd less than OPEC was predicting last month.

Oil prices have fallen about 5 percent over the last week as a peace deal between Israel and Hezbollah appears to be holding and BP reversed its decision to close the entire Prudhoe Bay field.

While neither Israel or Lebanon produces much oil, the fear was the conflict would spread to the broader region, which pumps 30 percent of the world's oil and holds 60 percent of its reserves.

As the Lebanese government considered how to make the U.N.-brokered cease-fire work, the United Nations said it planed to deploy between 3,000 and 3,500 troops within 10 to 15 days into southern Lebanon as a "vanguard force" working with Lebanese troops to consolidate the cease-fire there.

But oil prices still remain nearly 20 percent higher this year as a tight supply and demand situation magnifies the effects of geopolitical tensions, including a standoff with export heavyweight Iran over its nuclear program and fighting in fellow OPEC member Nigeria that has shut in 500,000 barrels of that country's high-quality crude.

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