Natural gas is no longer at decade lows, but the price remains sensitive to reports of any significant increase in supply.
The price dropped Thursday as the U.S. government said supplies continue to build, at a time when mild weather is dimming demand in parts of the country.
Natural gas fell 2.4 cents to end the day at $2.594 per 1,000 cubic feet in New York. That’s still nearly 70 cents, or 37 per cent, above the 10-year low of $1.907 hit on April 19.
The U.S. Energy Department reported Thursday that natural gas stockpiles rose 61 billion cubic feet to 2.667 trillion cubic feet for the week that ended May 11. That’s nearly 41 per cent above year-earlier levels and the five-year average. Analysts expected a smaller increase of 52 billion to 56 billion cubic feet.
Natural gas plummeted earlier this year as a production boom helped fill storage facilities while a mild winter allowed consumers and businesses to use less gas for heat. It has bounced back as some energy companies reduced production. Some utilities also switched to using more cheap natural gas to generate power instead of coal. Others used it as a substitute for nuclear power that was offline for maintenance, PFGBest analyst Phil Flynn said.
Now, the mild winter has given way to a mild spring in many areas. That means homes and businesses aren’t powering up their air conditioning systems just yet. And Flynn said many of the idle nuclear plants are being returned to operation, which could reduce the utilities’ need for natural gas.
Electricity demand from January through May 12 fell about 3.3 per cent from the same period a year ago, according to Edison Electric Institute, the country’s main electric utility trade group.
In other trading, oil prices fell as worries persisted about the future of Greece in the European Union and the long-term impact the crisis could have on the global economy. Some wonder if Greece will be forced to leave the group of countries that use the euro as currency if Greek politicians who oppose austerity measures win next month’s elections.
That uncertainty trumped positive U.S. economic news. The U.S. Labour Department said that weekly applications for unemployment benefits were unchanged last week at a seasonally adjusted 370,000. That indicated modest gains in the job market.
Benchmark oil fell 25 cents to finish at $92.56 per barrel in New York. Brent crude, which is used to price many international oil products, fell $2.26 to $107.49 per barrel in London.
Heating oil dropped 4.86 cents to end at $2.849 per gallon and gasoline futures declined 4.27 cents to $2.8782 per gallon.