Oil wavers on Europe and US data, natural gas plummets as supplies bulge during mild winter

DENVER – Natural gas prices plummeted nearly eight per cent Tuesday after a U.S. government report said U.S. 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 have been rising since 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 U.S. economic data.

Benchmark West Texas Intermediate crude fell 30 cents to end at US$98.48 per barrel in New York after hitting US$101.29 a barrel earlier in the day. Brent crude, used to price varieties imported by U.S. refineries, 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 U.S. a private survey found that consumer confidence dropped in January after rising 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 totalled 72.61 billion cubic feet per day in November, up 2.4 per cent 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 U.S. 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 U.S. consumers, whose heating and electric bills should fall eventually. Natural gas is used to heat about one-half of U.S. homes and to generate about a quarter of the country’s electricity.

In other trading on the New York Mercantile Exchange, heating oil rose one cent to end at US$3.06 a U.S. gallon (3.79 litres) and gasoline futures rose two cents to finish at US$2.89 a gallon.