Updated from 11:54 a.m. EST

Oil prices fell Monday after Nigerian militants released their last remaining hostages, relieving market concerns over tightening crude supplies.

Light, sweet crude slipped 10 cents to close at $64.16 a barrel on the Nymex. Oil rose 6% last week to settle at $64.26 on Friday thanks to supply disruptions in Nigeria and ongoing refinery maintenance.

"It takes a lull of three to four days when Iran doesn't say anything and nothing happens in Nigeria for a bull to sit down and take a break," says Guy Gleichmann, president of United Strategic Investors Group, a commodity brokerage firm in Hollywood, Fla. "That hasn't happened."

On Monday, a Nigerian rebel group released one British and two American oil workers they had taken hostage five weeks ago and vowed to end kidnapping. Still, the group, which calls itself the Movement for the Emancipation of the Niger Delta, vowed to continue its campaign of violence against the country's oil industry. Thus far, Nigeria daily crude output is down 26% to 1.6 million barrels due to attacks on oil installations.

Italian oil firm Eni ( E) said on Thursday it could not guarantee crude exports from its Brass River terminal, which processes 200,000 barrels per day, because of a pipeline attack last week. The conduit carries 75,000 barrels per day, but is expected to be operating by the end of this week.

Despite the hostage release, Shell ( RDS.A) said it would not resume operations in the West African country until the safety of its workers could be guaranteed. The oil giant has lost 455,000 barrels of crude per day in Nigeria because of the attacks.

The Chinese government increased diesel and gasoline prices 3% to 5% this weekend in an attempt to cool the country's soaring demand for oil. The increase was the first in eight months. GDP growth was also forecast to come in at 8.7% to 8.9%, short of the expected 15% to 20% growth the oil markets had expected.

Crude for delivery in May could hit new highs this week because much of Nigeria's oil production still remains offline. Also, a row remains ongoing with Iran over its nuclear development ambitions. Iran, OPEC's second-largest producer, pumps 4.4 million barrels of crude per day and has threatened to cut its exports if the international community imposes punitive measures over its decision to restart nuclear research.

The U.N. Security Council, which has been discussing what measures to take against Iran, is expected to release a statement this week. Tehran restarted small-scale uranium enrichment after a two-year hiatus and has refused to back down. The West has toyed with the possibility of a trade embargo, which would likely drive up crude prices and tighten already thin world supplies.

Unleaded gasoline gained 1 cent to settle at $1.82 a gallon on concerns above-average inventories will not be enough for the peak summer driving season. There is 1% more gasoline supplies than last year for a total of 221.6 million barrels.

"If there's any snag, gas could increase a dime and drag crude up with it," says Gleichmann. "I'm of the mind that the oil market is being led by the gasoline market mainly because of MTBE and refinery maintenance."

Ongoing maintenance could also crimp supplies because many refineries have shut some of their units as they retool to make cleaner, summer-blended gasoline and switch over to making gasoline that can be blended with ethanol. By May 31, refiners must stop blending gasoline with MTBE, or methyl tertiary butyl ether, an additive linked to water pollution.

On Friday, Exxon Mobil ( XOM) said it had closed some units at its Baton Rouge, La., which processes 488,000 barrels per day, and others at its Baytown, Texas, refinery, in May. The Texas refinery processes 564,000 barrels per day, making it the largest in the U.S.

Amerada Hess ( AHC) and Petroleos de Venezuela, S.A., the Venezuelan national oil company, said repairs at its Hovensa oil refinery in St. Croix would be delayed. Repairs at the oil complex, the second largest in the Western Hemisphere, were expected to be completed this Saturday. The refinery usually processes nearly 495,000 barrels of crude per day into petroleum products, like gasoline.

Rising temperatures in the Northeast, which uses the bulk of the country's heating fuels, and surplus inventories were dampening natural gas and heating oil prices. Heating oil closed down 1 cent to $1.78 per gallon and natural gas dipped 22 cents to finish at $7.07 per million British thermal units.

There is 39% more natural gas and 15% more distillates, which include heating oil, in storage than last year thanks to a mild winter. The National Weather Service said this winter has been one of the five warmest on record.

On Friday, a surplus of natural gas in storage outweighed cold weather predictions and drove down natural gas prices by 3 cents to a close of $7.29 per million British thermal units. A warmer-than-average winter has boosted supplies 39% over last year and 67% above the five-year average. Natural gas has fallen more than 50% since December when it touched $15 per million British thermal units

Heating oil and natural gas are used to heat businesses and homes. By the end of this week, temperatures are expected to reach the mid- to upper-60s, according to AccuWeather.com, a State College, Pa. weather forecaster. The peak winter heating season typically lasts from November to March, making April and May some of the lowest-demand months for heating fuels.

The surplus in natural gas is unlikely to be depleted even if the country has a warmer-than-average summer.

"It's tough to see how this will go down," says Kenneth Yeasting, director of North America Gas and Eastern North America Energy for Cambridge Energy Research Associates in Bloomfield Hills, Mich. "You have to have a horrible hurricane season, an extremely warm summer or a catastrophic nuclear event that forces the closure of all the nuclear reactors to erase our supply."

Meanwhile, shares of energy companies rallied after falling in earlier trading. The Philadelphia Oil Service Index, which tracks 15 oil field service companies, and the Amex Oil Index were each up less than 1%.

Shares of Chevron ( CVX) rose 64 cents to $58.21 and Exxon Mobil added 12 cents to $61.29 after reporting a large oil discovery that could hold more than 1 billion barrels in offshore West Africa.

Exxon shares were also buoyed by news the super major purchased a 28% stake in one of the world's largest oil fields from Abu Dhabi National Oil Co. for an undisclosed amount. The field is located in the Arabian Gulf off the coast of the United Arab Emirates. Exxon and its two partners, the Abu Dhabi National Oil Co. and Japan Oil Development Co., plan to double production to 750,000 barrels per day.

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