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Crude oil prices lose earlier highs

Oil prices retreated from earlier highs.

The fire late Wednesday along the Enbridge Energy Partners LP Lakehead pipeline in northern Minnesota, which carries crude oil from Saskatchewan to the Chicago area, killed two workers who were repairing it, authorities said. The pipeline, which actually consists of four separate conduits, was completely shut down for a while.

But two of the four lines, which can carry a total of 680,000 barrels of crude a day, were restarted Thursday morning, said Larry Springer, a spokesman for Houston-based Enbridge.

A third line, designed to carry 700,000 barrels a day of heavy crude, "remains shut down but is expected to return to service later (today) as it has now been confirmed that it was not damaged as a result of the incident," Enbridge said in a statement.

The fire-damaged line, which can carry 420,000 barrels of crude a day, could be repaired and returned to service within two or three days, the company said.

Light, sweet crude for January delivery rose 93 cents to $91.55 a barrel Thursday on the New York Mercantile Exchange, but that was down from an overnight spike of $95.17 on early reports of the fire. The gains follow two days of sharp downturns on concerns about weakening economic growth and a view that supplies are on the rise.

Meanwhile, the government said it was prepared to release oil from the Strategic Petroleum Reserve, if needed.

U.S. Energy Department spokeswoman Megan Barnett said Thursday that the United States has 63.5 million barrels of oil reserves in the Midwest region which "can provide a cushion ... (and) oil from the Strategic Petroleum Reserve is available to alleviate a severe supply disruption and remains available, if necessary."

The four Enbridge pipelines together have a capacity of about 1.8 million barrels of crude a day, which is about 17 percent of U.S. crude imports or 8.7 percent of overall domestic oil consumption. However, the pipelines carried an average of just 1.52 million barrels of crude a day in 2006, and were slated to carry an average of 1.64 million barrels per day in 2007, according to Enbridge's Security and Exchange Commission filings.

Analysts said the impact of the fire and shutdown was likely to be small.

"The implications for oil supply in the U.S. Midwest should be limited," said Lawrence Poole, an analyst with Global Insight in London, in a research note.

Meanwhile, traders will likely quickly return their focus to OPEC, which is expected to decide next week whether to increase production. Nigerian Oil Minister Odein Ajumogobia on Thursday told Dow Jones Newswires that the pipeline outage might give the Organization of Petroleum Exporting Countries another reason to boost output. Several OPEC ministers in recent days have said the cartel is ready to increase production to bring prices down.

Other energy futures rose Thursday. December gasoline futures added 1.23 cents to $2.288 a gallon on the Nymex, and December heating oil rose 1.98 cents to $2.5936 a gallon. Traders are concerned any disruption in crude supplies to the Midwest will reduce refineries' ability to produce gasoline and heating oil.

Natural gas for January delivery fell 5 cents to $7.436 per 1,000 cubic feet after the government reported that inventories fell last week by 12 billion cubic feet, less than analysts had expected.

In London, January Brent crude rose 60 cents Thursday to $90.41 a barrel on the ICE futures exchange.

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