Natural gas prices on Thursday fell to a new low for the year after the government reported that U.S. supplies grew more than expected last week.
The Energy Information Administration said the natural gas held in underground storage expanded by 93 billion cubic feet last week. Analysts expected an increase of between 86 and 90 billion cubic feet, according to Platts, the energy information arm of McGraw-Hill Cos.
Analysts said natural gas prices will continue to slide toward the end of the year, and that should keep a lid on energy costs this winter for homeowners and businesses.
The November contract for natural gas tumbled after the report to a new 52-week low of $3.346 per 1,000 cubic feet on the New York Mercantile Exchange. Natural gas settled 17.1 cents lower at $3.368 per 1,000 cubic feet.
Oil and natural gas supplies have grown this year in the U.S. and that typically weakens prices. Oil, however, has been propped up by a falling dollar that has made crude cheaper for investors holding foreign currency.
Natural gas contracts, which are also priced in dollars, don't get the same boost because they're not as popular with investors, analysts said. Gas also is produced in the U.S. and is much harder to export than oil, so foreign buyers typically don't look for natural gas.
Analyst Stephen Schork said it's unusual to see natural gas prices fall at this time of year, since demand tends to pick up as the weather cools and people crank up the heat.
"The rally usually starts right about now, but it's not coming," analyst and trader Stephen Schork said. "There's a lot of gas already in the ground. There's no significant weather out there, and the economy is still struggling."
The EIA inventory report said that the U.S. had 3.68 trillion cubic feet of natural gas in underground storage last week. That's 1.3 percent less than last year's supply, but 8.4 percent higher than the five-year average.
Benchmark crude oil for December delivery gave up $1.98 to settle at $80.56 a barrel on the Nymex. Oil prices are well above the 52-week low of $68.01 set on May 20.
Meanwhile, retail gasoline prices held steady at $2.831 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 11 cents more expensive than a month ago and 23.5 cents higher than a year ago.
In other Nymex trading in November contracts, heating oil fell 4.03 cents to settle at $2.2145 a gallon and gasoline dropped 4.16 cents to settle at $2.0410 a gallon.
In London, Brent crude lost $1.77 to settle at $81.83 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.