Crude oil futures prices dropped for the third straight day Thursday as a scheduled restart  of a major pipeline rekindled oversupply concerns in the world's biggest oil consumer.

Enbridge Energy Partners said its crude oil pipeline that can carry 670,000 barrels a day of  Canadian crude oil to the U.S. Midwest is scheduled to return to service Friday after a week-long shutdown to repair a leak. The line has capacity to handle one-third of U.S. imports of crude from Canada, the U.S.'s biggest foreign supplier.

News of the shutdown had pushed crude to a one-month high near $78 a barrel earlier this week. But the scheduled restart sent prices to a one-week intraday low of $74.11 a barrel, as it raises potential for swelling of crude oil inventories which ended August at a 20-year high.  Combined inventories of U.S. crude oil and petroleum products are the highest since January 1983, government data show.

Light, sweet crude oil for October delivery on the New York Mercantile Exchange settled down 1.9%, or $1.45, at $74.57 a barrel. On the ICE, North Sea Brent for November delivery settled down 94 cents, or 1.2%, at $78.48 a barrel.

"The Enbridge [pipeline] issue is behind us now and fundamentals remain weak," said Gene McGillian, analyst at Tradition Energy in Stamford, Conn. For crude oil to break out of its range this month of $72.50 to $77.50 a barrel, "we're going to need to see more than just slightly  better economic activity and start paring down huge inventory overhang," he said.

The Federal Reserve Bank of Philadelphia said Thursday that manufacturing activity in the mid-Atlantic region contracted slightly in September. Economists had expected the figure to be unchanged. Traders said the indicator was another in a recent string that show a sputtering economic recovery, which is likely to suppress oil-demand growth in the U.S.

Heating oil futures prices, which had risen in the past four days on hopes of rising demand  ahead of the winter and stepped-up exports, posted the biggest single-day decline in the month. "Distillate demand is looking better, but we've got a large stockpile on hand," said McGillian, referring to the umbrella grouping for heating oil and diesel fuel.

The National Oceanic and Atmospheric Administration Thursday forecast above-normal October through December temperatures in a wide swath of the U.S. from the desert southwest, across the central U.S. and into the inland Northeast. The outlook projects a warm start to the heating  season in most of New York and Pennsylvania, which together consume more than one-third of  U.S. heating oil demand. In the remainder of the Northeast, which is the world's largest heating  oil market, NOAA sees equal chances of normal, above-normal, or below-normal temperatures  in the final three months of the year.

October heating oil futures settled down 3.27 cents, or 1.5% lower, at a one-week low of $2.0999  a gallon. October reformulated gasoline blendstock futures fell 3.78 cents, or 1.9%, to $1.9247 a gallon, the lowest price since Sept. 3. The contract shed 5.6 cents in the past three days. The Energy Information Administration said that in the week that included the end-summer Labor Day holiday, U.S. gasoline demand fell to a six-month low while inventories top five-year  average levels for this time of year.

By David Bird    Of DOW JONES NEWSWIRES

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