Crude prices fell sharply in Thursday's trading session at the New York Mercantile Exchange despite a string of geopolitical news that would normally make oil more expensive.

The July West Texas intermediate contract lost $1.57 to $64.20 a barrel. Reformulated gasoline edged 5 cents higher to $2.36 a gallon, but heating oil remained unchanged at $1.93 a gallon.

June natural gas fell 7 cents to $7.69 per million British thermal units.

Early morning rumors of refinery outages in the U.S. sent crude prices down from the onset, according to Gene McGillian, an analyst at TSF Energy Futures. Refinery outages would lead to lower consumption of crude oil and decreased production of gasoline.

Once the price of crude oil fell below $65, traders with long positions appeared to panic, sending prices lower still, McGillian said. Crude oil will likely trade sideways between $64 and $66 for the near term, he speculated.

"As we start to head into a long weekend on both sides of the Atlantic, we expect to see volumes tail off, but markets should finish a touch higher, given the various geopolitical hotspots," according to Edward Meir, an analyst at Man Financial, in an email.

One development saw striking workers from the Nigerian National Petroleum Corp. interfere with crude deliveries to four oil refineries, according to analysts at Strategic Forecasting in Austin, Texas.

In the Kurdistan section of Iraq, insurgents sabotaged an oil well, setting it afire. The act was surprising to security officials, because Kurdistan has remained mostly free of the violence afflicting much of the rest of the country.

Meanwhile, the International Atomic Energy Agency reported Wednesday that Iran now has 1,640 centrifuges operating, 1,300 of which contain uranium. This is considerably more centrifuges than inspectors were expecting to find, and it is in direct defiance of the U.N. Security Council's most recent deadline for halting uranium enrichment, according to a report by Barclays Capital.

Coinciding with the report, the U.S. Navy sent nine warships into the Strait of Hormuz to the south of Iran.

Meanwhile, traders, consumers and politicians remain concerned about tight gasoline supplies in the U.S. Motor gasoline inventories are well below their average for this time of year, and retail gasoline prices are at record levels across the country.

On Wednesday, the U.S. House of Representatives suspended the procedural rules for a bill that prohibits gasoline "price-gouging," allowing the bill to skip committee hearings and go straight to the House floor. The Bill was later passed by a narrow margin. The Bush administration said that it doesn't favor the bill because it amounts to setting price controls.

The Energy Information Administration released natural gas inventory figures for the week ended May 18 that were slightly bearish. Inventories grew by 104 billion cubic feet during the week. Analysts were expecting a 95 billion build.

Energy stocks took a hard tumble during the trading session. The CBOE Oil Index lost 1.5% to 718.29. ConocoPhillips ( COP) fell 2.4% to $74.89, and Chevron ( CVX) slid 1.4% to $80.24.

Exxon Mobil ( XOM) finished 0.9% lower at $82.24.

Elsewhere, Calyon Securities downgraded four oil-service companies. Ensco International ( ESV) was dropped to add from buy, sending its shares 3.3% lower to $57.96. Grant Prideco ( GRP) was downgraded to neutral from add, lowering its shares 4.8% to $54.71.

Transocean ( RIG) and Global Industries ( GLBL) were also cut to add from buy. Transocean fell 2.8% to $94.48, and Global Industries lost 5.3% at $22.53.

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