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Oil Prices Nosedive

Crude is sinking more than $1 to fall below $63 a barrel.

Updated from 11:18 a.m. EST

Oil prices sank below $63 Thursday as shipping channels reopened in Texas and traders focused on high supply levels of gasoline and distillates.

Light, sweet crude for February delivery dropped $1.06 to close at $62.66 a barrel on profit-taking, and traders' failure to bid prices above $64 also kept a lid on prices. Prices hit a high of $63.59 after rebels attacked two oil installations owned by


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in southern Nigeria. The facilities together produce 80,000 barrels of crude per day.

This week, prices have been swinging erratically depending on whether traders are focusing on fuel supplies, OPEC or mild weather. On Wednesday, prices hit a 14-week high of $63.72 a barrel after crude stockpiles fell more than expected in a government report.

Heavy fog finally lifted from the Houston shipping channel and Sabine-Neches waterway, and tankers were finally able to re-enter late last night and early this morning. But long lines of ships are still waiting to enter and exit the channels where many of the country's refiners are located. Several shipping channels in Texas and Louisiana have been effectively closed since Dec. 14

Although tankers were unable to offload crude, only

Royal Dutch Shell's


Deer Park refinery, which processes 340,000 barrels per day, was affected by the closure.

The slowdown will likely trim crude inventories this week, as it did last week. Falling imports and rising fuel production forced crude stockpiles down by 6.3 million barrels last week, the Department of Energy reported Wednesday, topping analysts' estimates of a 2.25 million-barrel decline.

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Distillates, which include heating oil, jet fuel and diesel, and gasoline unexpectedly rose last week, defying analysts' expectations of flat or falling supplies. Those fuels jumped largely because refiners have finished their seasonal maintenance and have boosted production. Traders' focus on increasing stockpiles forced wholesale gasoline prices down by 3 cents to settle at $1.64 a gallon.

Warmer-than-average weather in the Northeast and brimming supplies have pressured natural gas and heating oil prices in recent weeks. Heating oil dipped 2 cents to $1.70 a gallon, while natural gas picked up 3 cents to $6.80 per million British thermal units on short-covering.

Inventories of natural gas slipped by 71 billion cubic feet last week, the Energy Department reported in its weekly supply update this morning. The decline was in line with analysts' expectations and is far lower than the five-year average decline of 120 billion cubic feet. At 3.167 trillion cubic feet, inventories are 12% above last year and 9.5% above the five-year average.

For the remainder of the year, supplies are likely to remain high. The National Weather Service is predicting unseasonably mild temperatures through the beginning of January.

Energy shares were following crude lower, with drillers and refiners down 0.7% on the Amex Oil Index.


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Valero Energy

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were losing the most ground, shedding from 1% to 2.7% each.

Exxon Mobil

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was losing 0.1% to $75.98.