NATURAL gas prices plummeted nearly 8 percent yesterday after a government report said US production hit a record high, as weak demand during a mild winter kept supplies bulging.
Natural gas dropped by 21 cents to finish at US$2.50 per 1,000 cubic feet in New York. The price was 18 cents above the decade low it hit 12 days ago. Prices had been rising after several gas companies said they would cut back on production. But it wasn't enough to convince traders that America's gas supplies would decline significantly.
In other energy trading oil prices moved between gains and losses, as optimism about a new European treaty aimed at resolving the crippling debt crisis there was tempered by weak US economic data.
Benchmark oil fell 30 cents to end at US$98.48 per barrel in New York after hitting US$101.29 per barrel earlier in the day. Brent crude rose 23 cents to finish at US$110.98 per barrel in London.
Investors hope that the European agreement can help stabilize the region's economy by curbing overspending, jump-starting economic growth and creating jobs. That will mean more demand for oil.
But in the US a private survey found that consumer confidence dropped in January after rising in the previous two months. Also home prices fell in November, indicating that the anemic housing market probably hasn't hit bottom yet.
The Energy Information Administration said Monday that natural gas production totaled 72.61 billion cubic feet per day in November, up 2.4 percent from October. November production set a fifth consecutive monthly record, Tradition Energy analyst Addison Armstrong said in an email. Natural gas inventories remain well above the average level for this time of year.
Natural gas supplies have ballooned recently as companies tap vast reserves in shale formations holding oil and gas. Some estimates say the US has enough natural gas to meet its needs for the next century.
The combination of increased production and huge supplies is likely to keep natural gas prices low for some time to come. That's good news for US consumers, whose heating and electric bills should fall eventually. Natural gas is used to heat about one-half of US homes and to generate about a quarter of the nation's electricity.
In other trading on the New York Mercantile Exchange, heating oil rose 1 cent to end at US$3.06 per gallon and gasoline futures rose 2 cents to finish at US$2.89 per gallon.