Oil fell below $66 per barrel on Wednesday as unusually warm weather curbed heating demand in the United States and thwarted an early rally sparked by renewed threats from Nigerian militants to halt shipments from the world's eighth biggest crude exporter.

U.S. crude oil fell 51 cents to $65.80 a barrel, after climbing as high as $66.93, the highest since Sept. 30, on the New York Mercantile Exchange. In London, Brent crude was down 54 cents at $64.36 on the International Petroleum Exchange.

The weather remains unseasonably warm in the U.S. Northeast, the world's largest consumer of heating oil, curbing demand for the fuel. Temperatures there were expected to average above to much above normal through Saturday, according to private forecaster Meteorlogix.

"There is a lack of heating demand. We're experiencing a very unusual warm pattern in the United States," said Marshall Steeves, an analyst at Man Financial in New York. "Also, the DOE (inventory) expectations are pretty bearish for tomorrow."

Analysts in a Reuters survey predicted that U.S. inventories of heating oil and other distillate fuels rose last week by an average of 2.3 million barrels due to reduced demand. Gasoline stocks were seen rising by 2 million barrels, with crude stocks seen down by only 100,000 barrels.

Crude inventories sit well above the average range for this time of year, with distillates and gasoline comfortably within that range.

The hefty stockpiles and the warm weather mitigated news that Nigerian rebels threatened to widen their attacks to all foreign oil firms operating in the country.

Previously the rebel Movement for the Emancipation of the Niger Delta had focused on Royal Dutch Shell, forcing Nigeria's biggest foreign operator to cut production by 226,000 barrels per day, roughly 10 percent of national output.

In a statement e-mailed to Reuters Wednesday, the group said it had widened its attacks to facilities of Agip and Total and would also target Chevron.

Agip and Total issued denials. Shell said it was reviewing deployment of its 5,000 staff.

"We have decided not to limit our attacks to Shell as our ultimate aim is to prevent Nigeria from exporting oil," the rebels said.

"Pipelines, loading points, export tankers, tank farms, refined petroleum depots, landing strips and residences of employees of these companies can expect to be attacked. We know where they live, shop and where the children go to school."

Most of Nigeria's oil is produced in the Niger Delta, where an estimated 20 million people live in poverty alongside a multibillion-dollar industry.


For the world's big energy consumers, violence in Nigeria has come at a bad time. Iran's dispute with the West over its nuclear program has raised questions about the security of supplies from the second biggest producer in the Organization of Petroleum Exporting Countries.

Iran's supreme leader, Ayatollah Ali Khamenei, said on Wednesday the world could not deflect Iran from its "scientific developments."

Blanket sanctions, such as an oil embargo, are thought highly unlikely, but Iran has not ruled out using oil for leverage.

"The Strait of Hormuz, which borders Iran, is the preferred route for around 20 percent of global oil output. The prospect of this area becoming a military risk adds to the problem," said Tobin Gorey of the Commonwealth Bank of Australia.

Alleviating supply worries was news that Iraq resumed exporting crude oil from its sabotage-plagued northern fields in Kirkuk to the Ceyhan terminal in Turkey at 200,000 bpd and aims to reach 400,000 bpd in a few days.

Oil exports from the south also went up to 1.65 million bpd from 1.55 million bpd last week, Iraq's oil ministry said.