Updated from 12:08 p.m. EST

Oil prices took a late-session plunge Wednesday as traders deemed the local inventory situation more compelling than a handful of overseas tensions.

March crude finished down $1.32 to $66.60 a barrel after spending most of the day in positive territory. The decline followed a government report showing strong builds in U.S. crude and gasoline inventories.

According to the Energy Department, crude inventories rose 1.9 million barrels last week, about twice the rate forecast in a Reuters poll. Wednesday's gain, which brought inventories to 11% above their level at this time a year ago, reflected rising imports and a slowdown in domestic refining activity.

Many refiners are closed for seasonal maintenance after delaying it for months after a pair of hurricanes plowed into the Gulf Coast and shut down much of the area's petroleum production. For the week ended Jan. 27, refiners operated at 87% of their capacity, which pushed up inventories of crude, their raw material.

Average imports of oil were 9.6 million barrels per day, an increase of 339,000 barrels from the previous week. The rise was expected after a barge accident closed a Texas ship channel and a 240,000-barrel-a-day Total ( TOT) refinery two weeks ago. The Department of Energy made an emergency loan to the refinery from the Strategic Petroleum Reserve, but it was not scheduled to be available until last week.

Gasoline prices slid 8 cents to $1.73 a gallon after the report showed that inventories climbed by 4.2 million barrels. A 2% jump in imports and low seasonal demand pushed up stocks despite relatively flat production and a slight increase in demand.

Distillates, which include home heating oil, jet fuel and diesel, declined an unexpected 200,000 barrels. Lower stocks were attributed to a drop in production and a 46% drop in imports to 377,000 per day last week. Home heating oil fell 2.5 cents to $1.82 a gallon.

Analysts from Citigroup World Markets and Platts, a New York media group that tracks the oil industry, projected distillates would climb by between 900,000 and 1.5 million barrels because of unseasonably warm weather, which drives down heating demand and boosts fuel supplies.

Robust inventories will come in handy for the onset of cold weather. The National Weather Service predicted the Northeast, the country's largest market for heating fuel, will experience lower-than-average temperatures in February. Cold weather predictions were pushing up natural gas futures by 24 cents to $9.56 per million British thermal units.

Oil prices have jumped 11% since the start of the year on concerns that the nuclear standoff with Iran and militant attacks in Nigeria would cut world oil supplies. The Organization of the Petroleum Exporting Countries gave some relief to oil prices on Tuesday, vowing to keep its currently elevated production quotas unchanged.

Earlier, prices were higher as traders concentrated on overseas developments.

In his State of the Union address Tuesday, President Bush said Iran, which last month restarted nuclear research, is a country "held hostage by a small clerical elite." His comments came as the International Atomic Energy Agency prepares to meet to discuss Iran's nuclear ambitions. Sanctions would crimp already taxed global crude supplies.

"The Iranian government is defying the world with its nuclear ambitions -- and the nations of the world must not permit the Iranian regime to gain nuclear weapons," Bush said.

High fuel prices have boosted energy companies' earnings, with Devon Energy's ( DVN - Get Report) net income in the fourth quarter soaring 44% on higher energy prices. The Oklahoma oil and gas explorer made $970 million, or $2.14 per share, in the quarter, up from $673 million, or $1.35 a share, a year ago. Revenue was $3.2 billion, compared to $2.4 billion in 2004. Devon's shares lost 66 cents, or 1%, to $67.55 after missing estimates.

Duke Energy ( DUK - Get Report) saw its earnings rise 69% in the fourth quarter to $606 million, or 63 cents per share, due to high natural gas sales and residential power demand. But revenues fell to $3.1 billion from $5.5 billion during the quarter. Duke's share were trading 13 cents up, or 0.5%, at $28.48.

AmeriGas Propane, ( APU)the general partner of AmeriGas Partners, said net income rose 48% to $55 million, or 87 cents per limited partner unit, in the fourth quarter, versus $37.2 million, or 67 cents per limited partner unit, a year ago. Despite warm weather and lower propane sales, earnings rose on higher prices. Revenues zoomed up to $630.2 million for the quarter, up from 556.2 million in 2004. AmeriGas shares picked up 39 cents, or 1.3%, to $30.60.