Updated from 2:30 p.m. EDT

Crude futures fell Tuesday as tropical storm Wilma was upgraded to a Category 1 hurricane but looked likely to spare the main Gulf of Mexico energy regions.

Wilma is the 12th hurricane of the season, the National Hurricane Center said, and it is expected to gather strength as it moves west-northwestward to become "a major hurricane in the northwestern Caribbean Sea."

The center of the storm was last pegged about 180 miles south of the Cayman Islands. Forecasters said it is not currently on a track that threatens most oil facilities in the gulf, which have already been hit by hurricanes Rita and Katrina. Wilma could strike South Florida by the weekend and Hurricane center officials advise people in the Florida Keys and other areas to closely monitor the storm's progress.

Light, sweet crude for November delivery fell $1.16 to $63.20 a barrel. Home heating oil was down about 5 cents to $1.93 a gallon, and natural gas was off 47 cents to $13.42 per million British thermal units. Unleaded gasoline fell about 9 cents to $1.72 a gallon.

"Everything's looking better than expected," said Mary Novak, managing director of energy services at Global Insight. "The refinery situation is looking better than expected. U.S. natural gas is coming back as anticipated. We're increasing our imports of gasoline from Europe. Everything right now seems to be holding."

Novak said Wilma, which had caused some jitters on Monday among traders, looked like less of a threat Tuesday.

The U.S. Minerals Management Service said Tuesday's shut-in oil production was 982,011 barrels of oil per day, the equivalent to 65.5% of the gulf's daily oil production. Wednesday's shut-in gas production was 5.346 billion cubic feet per day, the equivalent to 53.5% of the gulf's daily gas production.

In economic news, Federal Reserve Chairman Alan Greenspan warned that higher oil prices will slow the world economy markets. Speaking to business leaders in Tokyo, Greenspan said that while economic expansion appears to have been on a reasonably firm path through the summer, "the recent surge in energy prices will undoubtedly be a drag from now on."

In addition, the Labor Department said wholesale prices rose 1.9% in September, led by the sudden price rises for gasoline, natural gas and home heating oil after the shutdowns of Gulf Coast refineries and oil platforms.

In company news, Halliburton ( HAL) said has agreed to purchase Easy Well Solutions AS, a Norwegian well technology company.

Morgan Stanley upgraded Houston-based oil and gas company Plains Exploration ( PXP) from equal weight to overweight.

CSFB initiated coverage of several energy companies. They include Noble Energy ( NBL), starting at underperform; Burlington Resources ( BR), starting at neutral; and Kerr-McKee ( KMG), also starting at neutral.