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Updated from 11:58 a.m. EST

Crude futures gave back ground Monday amid forecasts of a warmer-than-average week and OPEC predictions of sluggish crude demand next year.

The National Oceanic and Atmospheric Administration predicts heating degree days will be 24% lower in the Northeast and 27% lower in the Middle Atlantic this week. A heating degree day is a unit of measurement that compares temperature against heating demand for a particular day. Those two areas together use the most heating oil in the world.

After a cold snap two weeks ago, mild weather has returned to the Northeast just as winter officially begins on Thursday. Warm weather has helped boost fuel supplies, cap energy prices and limit the effect of OPEC's previous output reduction of 1.2 million barrels per day in November.

Light, sweet crude shed $1.22 to close down at $62.21 a barrel. Explosions at two Nigerian oil installations operated by



Agip and

Royal Dutch Shell

( RDS-A)were keeping oil prices from dipping further. Nigeria is the fifth-biggest crude exporter to the U.S. Rebels in southern Nigeria, where much of the country's oil fields are located, have been attacking the country's oil facilities to pressure the central government to give them a share of Nigeria's oil profits.

Warm weather crimped prices of natural gas and heating oil by 33 cents to $7.07 per million British thermal units and 6 cents to $1.72 a gallon. Both fuels are used to heat homes and businesses.

Wholesale unleaded gasoline finished down 2 cents at $1.66 a gallon.

Oil prices leaped past $63 last week after OPEC agreed to trim production for the second time this year. The group expects to cut daily output by 500,000 barrels, or about 2%, starting in February.

Oil prices have been seesawing between $57 and $61 over the past two months as traders focused alternatively on brimming fuel supplies, warm weather and debate over whether OPEC would trim output to shore up falling oil prices.

By leaving a supply cut until February, OPEC left itself room to tweak or get rid of its reduction altogether. If economic growth slows next year and prices drop, OPEC may have to re-examine its reduction. The cartel, which controls 40% of the world's crude, forecasts high energy prices will keep global oil demand much the same at 1.3 million barrels a day in 2007.

"Risks for oil demand appear to be more weighed on the downside, given the dangers to global economic growth emanating from a visibly weakening U.S. economy, where some forecasts show a non-negligible risk of downright recession," the OPEC report said.

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Despite falling for the past three weeks straight, crude stockpiles are nearly 4% higher than last year. They may drop even further because heavy fog has shrouded the Sabine Neches Waterway and the Houston and Calcasieu Ship Channels in Texas and Louisiana, where many of the country's refineries are located, for the past five days.

Although most refiners have not yet been impacted, the Deer Park refinery operated by Shell and Petroleos Mexicanos has seen crude volumes drop slightly,

Dow Jones

reported. The facility typically handles 340,000 barrels of crude per day.

The fog is expected to lift on Thursday.

In stock market action, energy shares tracked crude's decline, falling 2.7% on the Amex Oil Index.

The biggest news of the day among energy companies was a proposed merger between Norwegian oil companies

Norsk Hydro

( NHY) and

Statoil ASA


. In the deal, Norsk would merge Statoil's oil and natural gas operations in an all-stock deal worth about $30 billion. The deal would create the world's largest offshore oil producer, topping Shell with combined production of 1.9 million barrels of crude per day. If regulators and shareholders approve, the deal is expected to close in the third quarter.

Four oil companies got hit with ratings downgrades Monday from Friedman Billings Ramsey, which expects declines in crude prices next year.

Exxon Mobil






Murphy Oil


all felt the downgrade ax, dropping from outperform to market perform.

Shares of the companies were recently down between 2% and 4.7%.

Friedman Billings Ramsey also downgraded



to under perform from market perform, citing valuation concerns. Total shares were recently down 1.6%.

Among other energy names,




Occidental Petroleum



Anadarko Petroleum


were leading decliners, down from 3.7% to 5.5% each.