Natural gas prices fell sharply Thursday after spring-like weather blanketed much of the country, raising expectations that demand will remain weak. At the same time, supplies have stayed well above year-ago levels.
The amount of natural gas in storage in the U.S. fell 80 billion cubic feet to 2.433 trillion cubic feet last week. That figure is 48.3 percent more than the five-year average, the Energy Department said. Analysts had expected a decline between 82 billion cubic feet and 86 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill.
Natural gas fell 5.5 cents, or 2.4 percent, to $2.247 per 1,000 cubic feet in New York. The price has fallen about 27 percent this year and is at the lowest level in a decade.
Oil, meanwhile, rose near $107 per barrel as traders continue to be concerned about tensions between Israel, the U.S. and Iran.
Natural gas stockpiles have expanded steadily this year as consumers and business owners have kept thermostats at lower temperatures during a mild winter. About a quarter of the nation's electricity is generated using natural gas.
At the same time, production is booming because energy companies are accessing underground reserves using newer drilling techniques. Chesapeake Energy Corp. and other producers already have said that they will reduce production because of the low price.
Some analysts speculate that the price could fall to $2 per 1,000 cubic feet or even lower if demand doesn't pick up significantly when air conditioners are turned on for the summer.
"The bottom line is that there is too much natural gas in storage and temperatures are unlikely to help in the near term," Cameron Hanover analysts stated in a research report.
Energy consultant Jim Ritterbusch thinks more producers will announce voluntary production cutbacks before the price falls too much lower. He's forecasting a range of $2.15 per 1,000 cubic feet to $2.20 per 1,000 cubic feet.
In other trading, oil prices rose because of developments in the Middle East and Europe.
Tension over Iran's nuclear program is a big reason that oil prices have risen about 14 percent in a little more than four months. On Thursday, an Israeli official claimed satellite images back Israel's contention that Iran is developing a nuclear weapon.
Oil prices also got support from signs that a $140 billion bond swap deal to restructure Greece's debt will succeed. That would keep the country from defaulting on a massive amount of debt and benefit the European economy. The results of the exchange are expected to be announced early Friday.
That development overshadowed a report from the U.S. Labor Department showing that the number of people seeking unemployment benefits rose slightly more than expected last week.
Benchmark crude rose 55 cents to $106.71 per barrel. Heating oil rose 4.34 cents to $3.2628 per gallon and gasoline futures increased 2.15 cents to $3.3089 per gallon.
At the pump, the national average for retail gas fell 0.3 cent overnight to $3.758 a gallon, according to AAA, Wright Express and the Oil Price Information Service. The price is about 28 cents more than a month ago and about 23 cents more than a year ago.