Oil dropped to under $69 a barrel on Wednesday, falling back after U.S. industry data showed gasoline reservoirs swelled unexpectedly.

By 1125 GMT (6:25 a.m. EDT), U.S. crude for August delivery was down 46 cents at $68.78. London Brent crude fell 50 cents to $68.30.

American Petroleum Institute (API) data on Tuesday showed inventories of gasoline surged 3.7 million barrels, well above the predicted 1.3-million-barrel increase, as refiners raised their utilization rates and imports rose.

The U.S. government's Energy Information Administration data on Wednesday was expected to confirm the API's view.

The API figures are not a favorable precursor for the EIA numbers when these get released later on Wednesday, analyst Edward Meir at MF Global wrote in a note to investors.

What could offset this bearish pressure somewhat, will be what happens to the dollar in the wake of the Fed decision.

The dollar tumbled to its lowest levels for a week against the euro on Wednesday, as markets braced for the Federal Reserve to dampen expectations for higher interest rates at the end of its meeting later in the day.

Oil prices have more than doubled since last winter's low $30s as investors have begun pricing in expectations of an economic recovery that should boost consumption.

The Commerce Department will release U.S. May durable goods orders at 1230 GMT (8:30 a.m. EDT). Economists polled by Reuters expected a fall in orders of 0.6 percent versus a rise of 1.7 percent in April.

U.S. new home sales for May were expected to rise to 360,000 annualized units versus 352,000 in April, a Reuters poll showed.

(Additional reporting by Jennifer Tan in Singapore, editing by Keiron Henderson)