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Oil falls on warm weather, profit taking

NEW YORK -- Crude oil prices dropped below $64 a barrel yesterday, as traders took profits from last week's surging prices and focused on warm weather in the United States, which is dampening demand for heating oil.

Light, sweet crude for February delivery on the New York Mercantile Exchange fell 71 cents to settle at $63.50 a barrel.

Heating oil fell nearly more than 3 cents to settle at $1.7677 a gallon. Gasoline slipped nearly 5 cents to settle at $1.7677 a gallon. Brent crude on London's ICE Futures exchange fell 71 cents to settle at $62.01 a barrel.

''More than anything, we're looking at profit taking after a huge up week," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

During last week, the first of 2006, crude prices rose 5 percent to $64.21 a barrel Friday from a week earlier.

Flynn noted the falling dollar contributed to oil's rise last week, as oil is denominated in the dollar. But yesterday the dollar rallied, helping to push oil back down.

Warmer than usual weather in the United States is another factor in oil's fall, Flynn said. In parts of the Northeast United States, the largest consumer of heating oil, temperatures reached the 50s, and forecasters expect those spring-like temperatures to continue through the week.

Still, some analysts say the overall outlook remains bullish, boosted by recent threats to supply, such as the natural gas dispute between Russia and Ukraine, in which Russia cut pipeline runs, raising fears about the stability of global supplies before Russia and Ukraine reached agreement to end their gas dispute.

''We can expect an overall high floor in prices this week," said energy analyst Victor Shum with Purvin & Gertz in Singapore.

Analysts have said investors and speculators were pouring money into the market out of faith that demand will keep rising and that the possibility of energy supply disruptions from Iraq and Nigeria won't soon fade.

''The hedge funds and speculators are quite gung-ho about the market so far this year," Shum said, ''because threats of supply disruption will continue to be there and provide another year of volatility."

Natural gas futures fell more than 27 cents to settle at $9.36 per million British thermal units, also under pressure due to mild temperatures throughout the United States.

The front-month contract has plummeted 39 percent since Dec. 13, when it hit a record peak of $15.78 on fears of a cold winter and disrupted production in the Gulf of Mexico in the wake of Hurricane Katrina.

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