Natural gas prices posted a recent decline to its lowest in ten years following the refusal of Exxon Mobil and several oil companies to reduce production.
Over the previous years, Exxon, the largest producer of natural gas in the United States, has directed the industry into gas drilling inside the country. That resulted to an all-time high level of production growth. Storage supplies stay higher than average and several experts estimate that the country has sufficient natural gas to supply its requirements for about at least 100 years.
In New York, natural gas prices recently dropped by 12 cents or about 5% to end at $2.38 for every 1,000 cubic feet. The reduction came after a previous fall of 8%. Last January 19, it also reached its lowest level in ten years of $2.32 for every 1,000 cubic feet.
There was a brief period of price increase but this happened when Chesapeake and other oil companies expressed that they will reduce their production of natural gas. But crude oil prices increased again after investors doubted that the cut will greatly affect supplies and the mild winter weather continued and kept demand low.
Jim Ritterbusch, an independent energy analyst, said that traders have been watching for indications that other manufacturers will put more effort to lower the huge excess in America’s natural gas supplies. Yet, it seems that they are not willing or are unable to do so.
A continues reduction in natural gas prices will be advantageous the economy of the United States because it will lower electric and heating costs for a lot of households and businesses. Over 50% of residences in the United States utilize natural gas for heating and more power companies are already beginning to shift from coal to more affordable and environmental friendly natural gas in operating their generators.
In the meantime, benchmark oil prices were already lower in the past days. In New York, West Texas Intermediate crude price per barrel decreased by 87 cents to close at $97.61. In London, Brent crude prices grew by 58 cents to end at $111.56.
Prices declined after economic data reflected that the supplies of the country’s crude increased lately and demand for energy stayed weak.
According to the Department of Energy, gasoline and oil demand reduced in the past week while inventories rise. Simultaneously, a report from a trade group showed that U.S. manufacturing activity grew in the month of January at the quickest level in seven months. That implied increased oil demand in the coming months.
Retail gasoline prices lately increased by less than one cent at an average of $3.45 a gallon nationally. This is according to the data provided by the Wright Express Oil, AAA and Price Information Service. One gallon of regular oil is higher by 17 cents and 35 cents compared to the previous month and more than one year ago respectively.
In other trading of energy, heating oil prices fell by a penny to end at $3.05 a gallon. Gasoline futures remained the same at a price of $2.89 a gallon.
By: Chris Termeer